The slogan goes, “tax doesn’t have to be taxing” but that’s only true if you know where and what to look for. This said, we decided to offer up a short guide to understanding your tax contributions and exemptions.
First things first, if you are working somewhere and you are a student, you should have filled in a P38 form – if you haven’t, make sure you do! A P38 is a form that exempts you from income tax so long as you do not earn more than your personal allowance within that tax year. For the tax year 2011-2012, your personal tax allowance is £7,475, so the only deductions on your payslip before this threshold should be national insurance contributions (NIC). The tax code on your payslip will probably be 747L, 747L M1 or 747L W1, depending on whether you get paid weekly or monthly. The 747 part indicates your personal income tax allowance. The 747L tax code, also happens to be the emergency tax code, applied to an employee who is yet to be assigned the right tax code because either they filled in a P46 because they had no P45 or gave in the P45 at a later date after starting employment.
Now don’t be concerned if you haven’t filled out your P38. Many students are not aware of what tax relief they are entitled to and people all across the country, well after the tax year is over, often file to claim back tax contributions. In cases where you have paid too much tax, going about reclaiming it can be a mindboggling affair. If you don’t have a family accountant or a friend who does accounting, you can try unitaxback.co.uk. Unitaxback request you gather your P45s, P60s and payslips send them through and they will do the calculations – letting you know if you are entitled to a rebate. If you are, they charge 12.9% as a service charge for making the whole process stress free and if there is no tax for you to claim, there is no fee. Administration is not my strongpoint and if you’re anything like me, you never really know where we keep those all important documents. You can still request a statement of earnings by calling HMRC and they can send free copies in the post to you, as I did just a few weeks ago.
The amazing thing about the tax rebate is you could claim up to £1,000. Wonderful isn’t it, to know that you are sitting on a gold mine 😉 Most importantly, you can claim as far back as 6 years! So there is very little excuse for not getting this sorted. The filing process can take up to 6-8 weeks but you might just be rewarded for your patience.