A taxing surprise
In the latest submission to our Career Conundrums series, a future trainee wants to know whether having tax deducted from their SQE maintenance grant is the norm.
“Hi Legal Cheek. I have a TC lined up at a City law firm and need to complete the SQE before joining. My maintenance grant is £20k, which I know is at the higher end, but I’ve recently found out that it’ll be subject to tax, so in reality I’ll be walking away with quite a few grand less. I’d expected to receive the full amount, so it’s come as a bit of a surprise. Is this common? I’d be interested to know whether future trainees at other firms are also being taxed on their grants.”
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Best to go and check at accountantscheek.com
No it’s a grant and shouldn’t be taxed
I’ve heard of this happening but normally the firm covers the tax.
Congratulations on securing funding from such a generous firm. Ask the firm to double check the tax position.
It is a payment by an employer to a prospective employee, so I can see how income tax might be charged, like a recruitment bonus or any other payment of employment income.
But it sounds like it could be a “scholarship” for full time study that would be exempt within s.776 ITTOIA and s.215 ITEPA. Also see EIM06205. The amount exceeds the £15,480 guideline in SP4/86, but I’d still hope there should be no income tax.
If the firm is taking the view that it is taxable, they might be willing to bear the tax too. Or they might take the view that they have been generous enough already.
It’s an educational endowment, surely. Under Sections 211-212 of the Income Tax (Earnings and Pensions) Act 2003, I would have thought it would be tax exempt, in a similar fashion to a first-six grant during pupillage (ie a period in which the recipient is solely learning rather than practicing law). Certainly, it’s worth seeking clarification.
i have a grant which is £15k + student loan and Im not taxed so i think this is a mistake
HMRC wants to know your location
Welcome to work! Tax your grants, tax your income, tax your car, your pet, your shopping, your house. They’ll even tax you for the misfortune of dying!
Apparently the tax is a new thing this year. Some firms are covering the tax and some aren’t. I guess firms will have to advertise whether their grants are inclusive of tax from now on.
Your pay will invent time travel
Intrigued by your username