UK student workers earn over £6,400 tax-free
Author: Richard Mannion
Thousands of UK students planning to supplement their income by working during the summer holidays should ensure that their employer issues them with a P38(S) form when they start work, warns Richard Mannion, national tax director at Smith & Williamson, the accountancy and financial services group.
“If the student does not complete the P38(S), he or she will be taxed under the normal rules for new employees who have no P45 form,” Richard says. “This involves use of the emergency tax code, which means that the student will pay tax on any amounts paid to them above £125 per week.”
“With the minimum wage for 18-21 year-olds being £4.83, an employee on this amount would only have to work 26 hours to be subject to tax. A student earning £5 per hour, working 40 hours a week would pay nearly £15 per week under the emergency tax code.”
Only students on a UK course until at least the end of the tax year (5 April 2011) qualify for the P38(S). In addition, they can only work during school or university holidays and their total earnings and income from other sources during the tax year cannot exceed £6,475.
Richard says: “Where a student has overpaid tax in this way, they will need to write to HM Revenue & Customs to request a refund. This can take time to obtain, which can prove tough for students who typically don’t have a lot of spare cash. Students planning to work during the summer holidays should be particularly aware, as it is much better to learn this lesson and avoid paying the tax in the first place.”
HMRC recently issued a consultation document which threatens the future of the P38(S) scheme, but no changes will be made until April 2011.
For further information, contact:
Richard Mannion, National Tax director
020 7131 4252 or email Richard Mannion
PR enquiries
Jess Koslow/ Kate Harrison 020 7131 4264/ 4228
Disclaimer
By necessity this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Article correct at time of writing.
Note to editor
Smith & Williamson is an independent professional and financial services group employing around 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-size corporates. It operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Salisbury, Southampton and Worcester.
Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.
