Students: Why the P38s Form is Vital

Student tax is an area filled with confusion and misconceptions. Students who choose to work while in education often find their earnings incorrectly taxed, and often struggle to secure a refund.

It is possible, however, to avoid many of those problems. If you work only in the holidays and you do not think you will have to pay tax, the P38S form can save you a lot of hard work – and money.

What is the P38S?

Students face a common problem. Many work for an employer, but only during the holidays. In these cases, their total earnings are often lower than their annual income tax Personal Allowance – meaning that they should not be required to pay tax.

In reality, many students find their pay packets tax through the PAYE System anyway. In the worst cases, students are assigned an emergency tax code, and end up paying even more tax than they would if they had exceeded their personal allowance.

The P38S is supposed to solve this problem. If you think that your total earnings over the course of the year will be lower than your personal allowance, you should ask your employer for a copy of the form. You should then fill it in and send it to your Tax Office. Theoretically, this should prevent you from being taxed – provided that your earnings are lower than the personal allowance.

I thought Students Didn’t Pay Tax?

This is a common misconception. In fact, students pay tax just like anyone else. The only difference is that most students earn less than their personal allowance.

Every taxpayer has a personal allowance (set at £11,000 for the 2016-2017 tax year. This means that you do not pay tax on your first chunk of earnings in each tax year. But if your earnings exceed that threshold, even as a student, you will be liable to pay income tax.

What if I’ve Overpaid My Tax?

It is very common for student employees to find that they are being incorrectly taxed. Often this is because their employer has not been provided with the information they need, or this information has not been passed on to HM Revenue & Customs (HMRC).

A failure to complete and return a P38S is a common reason for incorrect taxation. If you do not return this form, you will be taxed at source (that is, through the PAYE system) from your very first pay packet, which means that you will not get your personal allowance.

Even worse, if HMRC do not have the information they need to work out your Tax Code, they will assign you an emergency tax code instead. This can significantly increase the amount of tax you pay.

If you think you have overpaid your tax, you should speak to your employer in the first instance as they may be able to help you with your claim.

You should then phone your local Tax Office, and explain why you think you are owed a refund. If they have the necessary information, they will process your claim fairly quickly. If they need documentation to support that claim, they will let you know what you need to provide.