If you’re a full-time student, taxes are something you probably haven’t had to consider yet, so it’s completely understandable if you aren’t sure what can and can’t be taxed! That being said, no matter your situation, if you work a student job, or are eligible for a bursary or scholarship in the UK, you’ll have to start thinking about them! The big question is: are bursaries and scholarships actually taxable, or are they exempt from taxes?
The vast majority of bursaries and scholarships in the UK are exempt from taxation, including the NHS Bursary. Certain bursaries or scholarships may affect your tax credit, but these will always be made clear to you. UK bursaries and scholarships are considered by HMRC as separate from your Personal Allowance, and therefore are not taxable.
Don’t worry if you still need more information, taxes can be difficult to get your head around! In this article, I’ll talk you through taxes in relation to bursaries and scholarships, in university and more.
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Do you pay tax on a university scholarship?
No, students with university scholarships do not have to pay tax on them.
As stated on the government website, linked here, “Income from a scholarship held by an individual shall be exempt from income tax and disregarded for all income tax purposes, if the holder of the scholarship is receiving full-time education at a university, college, school or other educational establishment”.
This means that as long as you remain in full-time university whilst you receive income from a scholarship, you don’t have to pay tax!
Even if your university scholarship means that you receive a termly or annual payment (instead of a one-off payment like some scholarships), you won’t be taxed on any money you receive from a scholarship.
If you would like more information on how to get a university scholarship, I’d recommend checking out this Think Student article.
Are any scholarships taxed in the UK?
Other than for university, you can also get scholarships for other places too, including for private schools. You can learn more about private school scholarships in the Think Student article linked here.
Due to being studied at a different level, these different types of scholarship may work slightly differently to university scholarships. This section will explain if scholarships are taxed when they’re not for university study.
Most types of scholarships and financial awards for students are tax-free in the UK. This means that just like university scholarships, other types of scholarship won’t be considered taxable income unless specified. Despite this, it is always a good idea to check this and get written confirmation from your scholarship donor.
While most of these “will not be treated as income for tax credit purposes”, certain grants can affect tax credit. In this case, you should contact HMRC if you’re not sure whether this applies to you.
You can read more about this on the Low Incomes Tax Reform website, linked here.
Is a bursary considered taxable income in the UK?
First, to understand whether a bursary is taxable or not, you need to understand what a bursary is and how it works. This Think Student article has all the information you’ll need about bursaries, so I recommend reading it first.
If you know enough about a bursary, we can move on to how tax affects them. Much like a scholarship, a bursary is exempt from income tax.
The government website says: “Scholarships, exhibitions, bursaries etc held by a person receiving full-time instruction at university, technical college or similar educational establishment are exempted from income tax by Section 776 ITTOIA 2005.”
You can read more about this on the government website linked here.
This simply means that bursaries follow the same rules as scholarships in that as long as you are in full-time education, your bursary will be tax exempt.
Is an NHS bursary taxable?
As the NHS Business Services Authority website states, “income from a scholarship, exhibition, bursary or similar educational endowment” is an example of non-taxable income.
This means that students studying medical or dental courses in the UK, and who are fit the other eligibility criteria for the NHS bursary, will not have to pay tax on an NHS bursary.
You can read more about which types of income are non-taxable on the NHS Business Services Authority website, linked here.
The website also states on this page, “An NHS Bursary award is not subject to income tax deductions or National Insurance contributions and is not considered a salary or wage.”
This means that your NHS Bursary is considered separate from your Personal Allowance, which is taxable, so your NHS Bursary is not included and is then not taxable income.
Even if you aren’t eligible for an NHS Bursary, you might still be eligible for student finance, which is also non-taxable!
Do you have to pay back a scholarship or a bursary?
The short answer to this question is no, you do not have to pay back your scholarship or your bursary.
The UCAS website describes scholarships and bursaries as “essentially free money”, which you can read more about on their website linked here. What this means is that scholarships and bursaries are not like student loans you have to pay back but are extra payments to help you through education.
Scholarships and bursaries are one-sided payments that you don’t have to pay back. They are exempt from tax because they don’t contribute to your Personal Allowance.
Do students in the UK have to pay taxes?
This Think Student article goes into much more detail about the taxes students may or may not pay, so I would definitely recommend this article.
According to the government website, if you have a job as a student, you might have to pay income tax or National Insurance, depending on how much you earn. Check out more about this on the government website’s page, which you can find here.
If you earn more than £12,570 a year (as of June 2023), you might have to pay income tax as it is considered to be above your Personal Allowance. If you want more information on Personal Allowance, check out this section of the government website.
Remember, bursaries and scholarships do not count towards your Personal Allowance – this is why they are exempt from tax.
We’ve covered a lot in this article, but the very basic message is that you will most likely not be taxed on your bursaries or scholarships. There are only a select few grants that affect tax credit, but most bursaries and scholarships are tax free.