National insurance when student

[Callum1x]

I am a 17 year old student who is in full time education at 6th form and I additionally work part time at Tesco and am being charged NI contributions of around £40 per month.I am expected to earn £7500 by the end of this tax year should I be paying national insurance contributions even when I am still in full time education.

[PinkDalek]

Hello Callum

Welcome to the (new) Fool.

The fact that you are a full time student doesn’t, in itself, exclude you from being liable to National Insurance etc.

You can use the HMRC calculator here http://nicecalculator.hmrc.gov.uk/Class1NICs1.aspx which confirms you should be under the limit for NI deductions at your level of monthly earnings (if about £625 each month). Also see https://www.gov.uk/national-insurance-rates-letters.

Are your monthly earnings constantly in the region of £625 per calendar month or might you earn substantially in excess of that in certain months (which could push you over the limit in those months).

PD

[Callum1x]

Thanks for replying PD

It can vary , in busy periods such as Easter and Christmas I could earn up to £1000 in a monthly period due to the increase in hours but on average I would say around 750-850 a month.

Callum

[mearnsfool]

NI is not a nice tax in that if you pay too much in December, you get it back over the year as in income tax.

If you have one great month say December and earn £1,000 that month, you pay NI, say £36.

If the other 11 months you earn £400 a months in these months, you pay no NI, you do not get a rebate for December and even worse as your total earnings were £5,800 you do not get a years credit for your state pension.

If you did 12 months at £504 a month, you pay no NI but get a years NI credit for your state pension.

Students get no special deal on NI.

[PinkDalek]

It can vary , in busy periods such as Easter and Christmas I could earn up to £1000 in a monthly period due to the increase in hours but on average I would say around 750-850 a month.

As mearnsfool has confirmed, National Insurance is calculated on a Period of pay basis. Thus lumpy earnings that take you over the limit cause you to have Employee's NICs deducted, with no relief granted in other periods when earnings are below the threshold. If you use the calculator you can see what happens based on £1,000 for a month (as against £750-£850 on average).

I've never known if it is possible for the employer to spread the payments from those lumpy periods into the months in which you receive less pay. Obviously if they can, you'd receive less immediately after those festive times when you might need to the funds. I'd imagine that sort of scheme would not be permissible in any event.

How do you claim or get paid for those extra hours during those periods? If it is automatic then I would imagine there is no leeway. If it is based on an overtime claim or similar, then if you were to delay those claims until a month later you may be able to reduce the NIC burden to a small extent.

[JohnB]

It used to be you got NI credits while being a full time student in school (but not higher education). Is that still the case? If so any money you pay now won't make a difference, until your tax year doesn't match the academic year.

[pochisoldi]

It used to be you got NI credits while being a full time student in school (but not higher education). Is that still the case? If so any money you pay now won't make a difference, until your tax year doesn't match the academic year.

NI credits for 16,17 and 18 year olds in FTE ended in April 2010.

As far as earning pension years in your graduation year, it depends on how much gross pay you paid NI (or are treated as having paid NI on).
This can leave you in a position where you might have one more year than you realised.

In my case, in the tax year I graduated I had:

April-June: No work
June-November: Poorly paid temporary job, below the LEL, (no NI paid or treated as paid)
November-March: "Proper job" paying well above the LEL.

Net effect: I earned a full year's pension on the back of 5 month's work.