P38 require P45

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hello

Could anyone tell me whether a student who has worked for the holidays and completed a P38 (and is paid less than the eligible amount for P38) needs a P45 on leaving employment?

Sorry, I don't really understand the P38!!

Regards

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:P38 require P45

    Sorry the P38) Should read P38 !!!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:P38 require P45


    Haven't employed any P38 employees for a while, but when I did and they left, I always prepared a P45.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:P38 require P45

    P38 students are 'outside' the scope of PAYE/NI and therefore do not require a P45.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:P38 require P45

    P38 students are not 'outside' the scope of PAYE/NI, they are just taxed in a different way, and the NI rules operate as normal.

    HMRC do state that a P45 should not be prepared though:
    Note that you should not fill in a form P45 when the employee leaves, for a student who, because of the P38(S) procedure, has not had tax deducted.
    You may find this like useful:
    http://www.hmrc.gov.uk/guidance/cwg2chapter4.pdf
    Regards
    Tom
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:P38 require P45


    Tax has to be deducted if they go over the threshhold, so you do need to keep an eye on this.

    As long as a student is only working during their holidays, they are normally fine. But some work throughout a year and their earnings may then be taxed.

    The statement often voiced that 'students don't pay tax' is really annoying for those operating a payroll that employs students.

    We all pay tax if we earn enough, it's just that the paperwork for students allows for them to stay out of the usual PAYE system until they decide to leave education.

    For convenience, I used to put them all on cumulative codes and then it would sort itself out. Overall, very few remained on a P38, simply because they earned too much. Compliance officers agreed with me on this, but I always kept the P38s and P46s in their files.

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