Banks, Benefits and Tax

Banks

You can open a student bank account in nearly all banks and these accounts offer interest-free overdraft facilities for most full-time students opting to have their student finance paid into them.

Shop around when choosing your bank, find out how soon you will be expected to clear your overdraft when you graduate and how much interest will be charged if you exceed your agreed overdraft limit.

Don't be tempted simply by the free gifts on offer.

Make sure that you do not go over your agreed overdraft limit otherwise you will incur expensive bank charges.

To help you decide, check out the student banking survey results on the Save the Student webpage.

You can also find information on the best student accounts on the Money Saving Expert's student bank accounts webpage. 

Income Tax

When you are working whilst a full-time student your employer will ask you for a P45. If you have worked before commencing your studies you should have a P45 to give your new employer. If you do not have one, ask your employer to complete a starter checklist for HMRC (which replaced the P46) to ensure that you do not pay too much tax.

Keep records of holiday work and retain your P45 to pass on to your next employer.

If you work during term time, you will have to pay tax if you earn over the personal allowance in a week, even if you don’t expect to earn over your personal allowance over the financial year.

If you have more than one job but think that your total income is going to be less than your personal allowance ask HMRC to split your personal allowance between jobs so that you don’t pay tax.

The personal allowance before tax is due is currently £12,570 (an average £1,048 a month) for most people (as at April 2025). Any over-deducted tax will be refunded to you later. If you think there may be an error in your tax deductions, and you want to make sure that the Inland Revenue has the correct details, you can complete a form P91 to ensure that you pay the correct amount.

Remember if you do pay too much tax you can claim it back from the tax office; your employer will have the address or you can apply online.

Employers are required to send a form P14 to HM Revenue and Customs at the end of the financial year to enable any overpaid tax to be refunded to you. If you know you’re only working for a short time, e.g. just the summer, then you can fill in a P50 to reclaim tax back. You need to wait four weeks after your last day at the job to make the claim.

For more information see www.gov.uk/student-jobs-paying-tax

Part-time or vacation work does not affect full-time student support.

National Insurance

National Insurance contributions will be deducted by your employer if you earn over £242 per week.

Universal Credit

Universal Credit is available to some groups of students, for example those with children or with a disability and classed as having limited capability for work. To avoid an overpayment, you should notify DWP that you are a full-time student, so they include your student finance income in their calculation.

When calculating entitlement the DWP only include the element of student finance awarded for general living costs as income. It disregards £4,461 (known as the Special Support element) of the Maintenance Loan, Parents Learning Allowance, the Childcare Grant, and also an amount for books and travel.

To find out whether you are eligible for Universal Credits you should contact the Department for Work & Pensions on 0800 328 5644 or find information online at www.gov.uk/universal-credit