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If you are a student and only working during the holidays, it is likely that you won’t earn enough over the course of a year to be liable to pay income tax. If this is the case, you should complete a form P38S, which allows your employer to pay wages without deducting tax.

Before completing the form P38S you should check that you satisfy some conditions. You should be a student who plans to remain in full time education until after the forthcoming 5th April. All income which you receive should be totalled up to ensure that you won’t receive more than the personal allowances for that year. The current amount of personal allowances for 2011-12 is £7475. Any income which isn’t liable to tax doesn’t have to be included in the calculation, like scholarships, educational grants or student loans.

If you have a full time job during term time and work part time in the holidays, a form P38S won’t be applicable and you should complete a form P46 which you will receive from your new employer. Also, working during term time will require completion of a form P46 which will ensure tax is deducted at the correct rate from your wages throughout the year. In the year 2011-12, if you earn more than £139 a week you will pay National Insurance Contributions which your employer will automatically deduct.

It is crucial to ensure that you won’t earn more than your personal allowances during the whole of the year before completing a form P38S, or you may find yourself with an unexpected underpayment of tax.

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