What is PAYE?

What is PAYE? 3 tax rules UK students have to know.

What is PAYE? This is a tax payment method that benefits students in the United Kingdom. The idea of PAYE is that your tax payments will be less when you are a student and gradually grow when you earn more money in the future. Today, Viksnews.com will share with you the definition of PAYE and 3 tax rules UK students have to know.

What is PAYE?

PAYE stands for Pay As You Earn (pay the taxes right after receiving your salary). Most of us pay income tax under this system as follows: the employer deducts a tax from your monthly or weekly income to pay the tax authority. PAYE is not a tax, but a way to collect taxes.

What is PAYE?
PAYE (Pay as you earn) rubber stamp

Federal student loan borrowers can choose the PAYE repayment program if they struggle to make normal loan payments. For qualifying borrowers, the repayment plan limits payments to 10 percent of discretionary income. At the end of a 20-year repayment term, any outstanding loan balance is forgiven as long as no payments were missed during the term.

How to calculate PAYE payment?

To calculate your payment under PAYE, start by figuring out your discretionary income. Discretionary income is calculated by subtracting 150 percent of your state’s poverty level from your household income. State poverty levels are based on household size.

The poverty level for a household of one in New York was $12,060 in 2018, according to New York State Community Action Association. If you are single and living in New York with a $20,000 income, you would subtract $18,090 ($12,060*1.5) from $20,000. Your discretionary income would be $1,910. Your payments would be equal to 10 percent of this amount, so you’d owe $191 a year or $15.91 monthly.

What is PAYE?
your tax payments will be less when you are student and gradually grow when you earn more money in the future

3 tax rules UK students have to know

You must check your tax code regularly when you study and work

There are quite a number of students who find a job right during the semester, during a holiday or during the working time of ‘sandwich’ courses (Sandwich course are training programs that will take six months to one year working at selected companies in the industry. This time is calculated in the total time of the entire course).

You will be granted a PAYE tax code from HM Revenue & Customs (HMRC) – Tax is deducted directly into your monthly salary. From this tax code, your company will calculate the amount of tax you must pay and deduct directly into the salary. You only owe taxes when the amount you earn exceeds 11,000 pounds in 2016/17 (from April 6, 2016 to April 5, 2017). However, if your PAYE tax code is wrong, you may have to pay excess tax.

Tip: You should learn more about paychecks (payslip) on the TGFS website and check your tax code. Also, remember to check the tax rate when you go to work for the first time, then keep an eye on it, especially if you want to change jobs or do another job.

What is PAYE?
PAYE is not a tax, but a way to collect taxes.

Tax refund

In addition to paying attention to weekly / monthly paychecks, you must also check the tax you have to pay at the end of each year. The necessary documents include:

  • P60s from your company (each job has a P60 document) which detailing the amount you earned throughout the year and the amount of tax to be paid. You will receive this document before May 31 after the end of the tax year (the tax year starts from April this year to April next year).
  • P45s: if you quit your job that year, the company you worked for will give you a P45 document when you quit.
  • Add up all the money you earn from all jobs. If this amount is less than the personal assistance amount (£ 11,000) but you are tax deductible subject, contact the Tax and Customs Department (HMRC) for a refund.

Tip: If you change your accommodation, you must report it to the Tax Department and Customs to ensure that the relevant documents, as well as the refund checks, are sent to the correct address.

What is PAYE?
Federal student loan borrowers can choose the PAYE repayment program if they struggle to make normal loan payments

National Insurance Contributions

Some students are surprised to be deducted salary to contributions to National Insurance Contributions (NIC), even if they have not paid a tax. The NIC contribution is calculated on a period-by-month basis and does not exceed one year of tax, so you cannot get a refund even if you add up your salary at the end of the year as you would with income taxes.

Instead, your company will deduct NIC fees if you earn more than 155 pounds/week or £ 671 / month (for tax year 2016/17). You should also be aware that you will be charged more for the NIC if you work overtime or work full time during your vacation.

Tip: Remember to give the National Insurance Number to the company when you start working so that the Taxation and Customs Department can record your contribution. This will be necessary if you want to enjoy future benefits.

Read more: What is Rubbing Alcohol UK? 5 useful things you can do with Rubbing Alcohol.

 

Leave a Reply

Your email address will not be published. Required fields are marked *