Student employees
If you employ a student at any time other than their normal holiday periods (or if a student works for you both during and outside their holidays), then you should operate the normal PAYE procedures used for any other employee.
But if you employ a student solely during their summer, winter or Easter holidays, you may be able to pay them without having to deduct PAYE tax.
In most instances, National Insurance contributions will still have to be deducted.
Holiday-only employment for students on UK-based courses
If a student on a UK-based course only works for you during their holiday periods, and as long as their earnings remain below their Personal Allowance for the tax year, you can pay them without deducting PAYE tax.
Form P38(S)
To pay a student without deducting PAYE tax, you first need to obtain a form P38(S). The student must fill in the declaration on the form as soon as they begin working for you.
You should only complete the employer's statement on the P38(S) either when the student's period of employment with you ends, or at the end of the tax year on April 5 if that date falls during the Easter holidays and the student continues working beyond it.
You will need to obtain and complete a new form P38(S) for each tax year that a student works for you.
If a student's earnings exceed their Personal Allowance
As soon as the earnings of a P38(S) employee go above their Personal Allowance, you will need to start deducting PAYE tax from your payments to them.
If this happens, complete a form P46 with the employee (using the employee's original start date on the form rather than the date their earnings went above their Personal Allowance). You should then deduct tax as follows:
- if the employee has ticked box A or box B on the P46, start deducting tax using the code OT on a week 1/month 1 basis
- if box C has been ticked, start deducting tax using the code BR on a week 1/month 1 basis
You will also need to record these deductions on a form P11. If you already have a P11 for the employee you should update that. If not, you should prepare a new form P11 for them.
If a student's earnings do not exceed their Personal Allowance
If no PAYE tax has to be deducted, you will still need to complete a form P11 for any P38(S) employees who earn more than the National Insurance lower earnings limit.
- Enter the letters 'NI' for the tax code in Box K of the employee's P11.
- Deduct National Insurance contributions (NICs) from the student's pay and record these deductions on the P11 in the normal way.
(Unfortunately, you cannot currently set up a form P11 for holiday-work students using the P11 Calculator on the Employer's CD-Rom.)
Completing end-of-year forms P14 and P35
At the end of the tax year, prepare a P14 for any student for whom you had to keep a P11 during the year, and enter the relevant details on form P35. If you haven't had to deduct PAYE tax from a student employee and the tax code on the P11 is NI, do not make an entry in the tax code box on form P14.
More about PAYE end-of-year forms P14 and P35
Holiday-only employment for UK nationals studying on courses abroad
If you employ a UK national student who is studying on a course abroad, and who works for you only during their holiday periods, then the same P38(S) provisions outlined above for UK-based courses apply.
NICs are deducted in the normal way, but PAYE tax does not need to be deducted as long as the employee's earnings remain below their personal allowance.
Holiday-only employment for foreign students studying on courses abroad
In some instances, NICs will not be payable on the earnings of foreign students who work for you during their holiday periods. The rules covering NICs deductions in these circumstances are explained in our article on employees coming to the UK from abroad.
PAYE for employees coming to the UK from abroad
Some foreign students will also be able to benefit from the P38(S) procedures explained above, meaning that you won't have to deduct PAYE tax from their pay. The two eligible categories of foreign students are:
- nationals of other EU member states, excluding Bulgaria and Romania
- students sponsored by a range of HMRC-approved organisations
You will not need to obtain a form P38(S) from us for sponsored students. Instead, you will need to obtain the form direct from the student—they will have been given one by their sponsoring organisation.
List of sponsoring organisations for foreign P38(S) students
