Everyone, whether studying or not, can have a total annual income of at least pounds 4,045 before they are liable for any tax on that money.
For students, this total includes holiday earnings, work placement income and interest on savings. The student grant is on top of these figures: however reduced it may be, it is tax-free, and student loans are also ignored.
If the potentially taxable elements of your income fall within the pounds 4,045 limit, and for many people they will, you could even be due a tax refund.
Banks and building societies will pay interest gross if you ask them properly (a form IR85 is what you will need to fill in); even if you don't do it this way, you can apply to the Inland Revenue for the tax to be repaid.
Many students try to supplement their income with holiday work. Some people believe that being paid in cash somehow avoids the obligation to pay tax. Life, unfortunately, is not so simple. Firstly, it is the employer's duty to establish whether or not someone is an employee or is providing self-employed services. The vast majority of students, in these circumstances, will be employed. In this case, their employers need to decide whether or not they have to deduct tax from their student workers' incomes.
If the student can show that his or her total income in the tax year is within the personal allowance, the employee can sign a form P38(S) and give this to the employer - this will confirm that tax need not be deducted. If the student's total income is above this limit, however, he or she will need to sign a form P46, and the employer will then contact the tax office to establish what tax should be deducted.
It is important to ensure that these procedures are followed properly. There is nothing worse than having the Inland Revenue come along at a later date and request a large sum to settle historic tax liabilities. It is much easier to get your tax affairs on a sound footing right from the outset.
Some students may earn money in gap years abroad or in overseas holiday work. Unless they are out of the United Kingdom for more than six months they will probably be considered to be resident in the UK for tax purposes so all their earnings, wherever they arise, will be taxable here.
Foreign employers may deduct tax at source under their own tax rules. It should be possible for a student to get credit for this tax against any UK tax liability although, in general terms, such foreign tax would not give rise to a repayment in Britain.
Even after all this, however, students may find that they have paid more tax than they need. In this case they should fill in a tax repayment claim at the end of the tax year and send it to their local tax office.
Of course, there will come a time when tax rebates do become a rarity - when students graduate and (it is to be hoped) find a job.
New employers will want to know whether a student has had any previous earnings and will ask for a form for earnings (P45) from a previous employer. Failing this, new employers should follow the P46 procedures to obtain a tax code for the former student.
This takes into account the personal allowance to which the individual is entitled and should ensure that he or she pays the right amount of tax each month. Always check your tax code as soon as you receive it from the Inland Revenue and promptly discuss with them anything that does not seem right.
For the less fortunate of graduates, a period of unemployment may be unavoidable after leaving college. The jobseeker's allowance is potentially taxable but the current basic allowance would fall well within someone's personal allowance. So in practice it would only be taxable if other income is earned within the tax year.
q Elspeth May is personal financial services partner at KPMG, the accountancy firm.