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 0T 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.

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.