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The 2011 Budget was set against a bleak back drop, but there was positive news for UK students who do paid work alongside their studies. They could be up to £200 better off in this financial year.
The Coalition Government announced that the personal tax allowance would rise by £1000 this year from £6,475 to £7,475. This means that students can earn £7,475 between April 6th 2011 and April 5th 2012 without having any income tax deducted. Any students who earn more than £7,475 each year from term time jobs or holiday jobs will have £200 less deducted from their wages in tax than last year.
It was not all good news though for students in the Budget. For those who enjoy a cheeky tipple in the bar, the tax man will take some of the income tax cut back with increased duty on alcohol. The duty on all alcoholic drinks has risen by 2 per cent above RPI inflation, which has added around 4 pence to a pint of beer, 15 pence to a bottle of wine, and 54 pence to a bottle of spirits. Still, you will have to drink 14 pints per day or 26 bottles of wine per week for the duty increases to exceed the income tax cut.
Duty on tobacco was also raised by 2 per cent above RPI inflation. VAT increased by 2.5 per cent in January, so the tax man is definitely taking back with one hand some of what he gave away with the other. However, the increased standard rate of VAT is not levied on most students’ biggest costs: housing, utility bills, public transport, most food (except “junk” food and eating out). Students will have to spend £8,000 a year on VAT rated items for the 2.5% increase to cost them more than £200.
So the student winners from this Budget will be those who earn £7,475 or more from student jobs, and don’t eat, drink or smoke life threatening quantities of junk food, alcohol, and tobacco.
Actually earning £7,475 a year while studying full time will be a challenge for many students. At the minimum wage development rate (for 18-20 year olds) of £4.92, students would have to work nearly 30 hours per week to earn the £7,475 personal tax allowance. Most universities advise students to limit term time work to 17-20 hours per week, so they will not get close to the personal allowance on that basis.
Thankfully there are a large number of companies looking to hire students at the moment, and many are willing to pay more than the minimum wage. Employment 4 Students has plenty of student jobs advertised by companies who pay upwards of £6 per hour. At that rate of pay, students would only need to work 24 hours per week to earn £7,475 per year and take full advantage of the personal tax allowance, which could be done by taking a part time term time job and a full time holiday job.
Students can get more student tax advice here, or apply for a tax refund if they think more income tax was deducted in the last financial year than should have been.
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