Study loans and pupillage awards

Study loans are sadly not tax deductible and are not seen by HMRC as a business expense.

Scholarships from the Inns are exempt from income tax.

In relation to pupillage awards the Bar Council and HMRC have reached an agreement as to the taxation treatment of pupillage awards. There are two options:

  • Option 1: The pupillage award in respect of the pupil’s first six months will continue to be tax-free, but the award in respect of the second (or subsequent) six months will be included as normal professional earnings in the year of receipt.
  • Option 2: Both the ‘first six’ and ‘second six’ awards will be taxable in the fiscal year of receipt under the general sweep-up provisions (“income not otherwise charged” see Income Tax (Trading and Other Income) Act 2005, Part 5, chapter 8, s687).

The option that you choose is up to you and will depend on a variety of factors such as the level of your award and the date that your accounting year starts. You should discuss this with an accountant if you are in any doubt (see further the Taxation Handbook, below).

There are also National Insurance differences; under Option 1 Class 4 NICs are chargeable, but under Option 2 the award is exempt – see the Taxation Handbook at paragraph 69 (link below).

For more detail on loans and awards generally see paragraphs 61-84 of the Taxation Handbook: 

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