Taxing times for UK students

We read with much interest, that from 6 April 2013, HMRC has withdrawn the form P38(S), which can be used for student employees.

Under current rules, 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. The P38(S) is the form which must be completed in order to get this special tax treatment.

The P38(S) treatment was designed to help students whose earnings for the year will not exceed their personal allowance. A very useful form many considered, – a rare glimmer of common sense in an overly complicated tax system.

After the form is scrapped, students will have to have tax deducted up front which they will have to claim back later. As tuition fees go up and more and more students will be taking on holiday work to survive, it may stand to disadvantage many. However HMRC’s rationale is that the P38 procedure was applied inconsistently and sometimes incorrectly (e.g. some employers erroneously accepted P38(S) for term-time working or from foreign students…) so the system needed an overhaul.

Whilst, students can use a P50 form to claim in-year refunds if they do not intend to take on more paid work in the same tax year, various tax bodies have said that HMRC must explain clearly how in-year refunds will work for students, and make sure the information reaches the student population. There is talk of building a website for students to help them with common tax issues and how to claim refunds etc if the P50 form is not appropriate, however maybe we are being cynical, but could HMRC secretly be hoping that many who have had tax deducted unnecessarily won’ t bother applying for refunds?!

It’s always worth checking if you’re due a tax refund, folks. Here are several useful links below: