If you are hiring in those key holiday periods then there are circumstances when you may be able to pay them without deduction of PAYE but they will still be subject to NI.
The key here is to ensure that you obtain a form P38(s) and you ask your student to complete the declaration. You can then pay them normally without deduction of tax but if they earn over the lower earnings threshold they are subject to NI.
As an employer you complete the declaration at the end of their period of employment or the end of the tax year. You need to hang on to these forms for at least 3 years.
If the employee, during any period of employment with you, go above the personal allowance then you need to commence deduction of tax. At this point you need to ask them to complete a P46 and deal with them as any normal employee.
As a payroll service provider we are often asked question and spot common errors when it comes to student employees. A few areas to watch for are:
- You need a new P38(s) for each employee for each tax year that they work for you - be careful of Easter holidays if it crosses over a tax year end
- If you employ a student outside of holiday periods they are taxed as a normal employee
- If earnings at any point exceed the personal allowance level then you must start taxing them
- When a P38(S) employee goes beyond the threshold you need a P46, dated from the day they started employment with you
Business Link have more comprehensive guidance on student employees on their new employee - special situations section of their website.