11 May 2026 
Julia Ascott, Employment taxes specialist
Universities have long managed PhD researchers within a hybrid framework that treats them neither wholly as students nor as employees. This is perfectly set out in the HEPI guest blog from Dr Charlotte Fawcett 'Caught in between: The ambiguous status of PhD researchers'. While this approach is well established, it creates ongoing and practical difficulties for tax and payroll professionals responsible for ensuring compliance, consistency and clarity.
At the core of the issue is the misalignment between legal/tax status and day-to-day reality. PhD researchers are typically funded through tax‑free stipends that meet the conditions of scholarships or studentships, placing them outside PAYE and National Insurance. At the same time, universities increasingly operate formalised doctoral programmes involving defined working patterns, performance monitoring, allocated leave and professional expectations. This creates a visible contrast between how PhD researchers appear to operate and how they must be treated for tax purposes.
One of the most persistent difficulties is perception versus classification. PhD researchers may reasonably assume that structured hours, office space, teaching responsibilities and supervisory oversight imply employee status. Tax teams, however, must apply HMRC’s employment status tests, which focus on contractual reality rather than an intangible academic structure. This gap often results in confusion and challenge when individuals and HMRC themselves question why tax, NIC or pension treatment does not mirror that of other staff undertaking apparently similar activities.
A second challenge arises from multiple concurrent income streams. PhD researchers frequently receive:
Each stream requires separate tax analysis, payroll treatment and reporting. For payroll teams, this creates complexity in Real Time Information submissions, student loan deductions, auto-enrolment assessments and year-end reporting. For individuals, the distinction between taxable and non-taxable income is not always intuitive, increasing the risk of misunderstanding or complaint.
HMRC has provided BUFDG with clarification around the ring-fencing of income streams, ensuring that where commensurate rates of employment income is paid for employment related duties, it will protect the tax free nature of the stipend. However, this can become difficult where boundaries are blurred.
Where teaching or research duties become extensive, recurrent or essential to delivery, it can become harder in practice to demonstrate that paid activity is genuinely separate from doctoral study. Tax professionals must often scrutinise arrangements to ensure that stipends are not, in substance, remuneration for services — a risk that increases as universities rely more heavily on doctoral researchers for core teaching and research support.
From an advisory perspective, tax teams also encounter difficulties caused by external interpretation of doctoral status. Mortgage lenders, pension providers and other third parties frequently seek confirmation of employment status or income stability. Although these matters sit outside tax law, universities are often asked to explain or confirm arrangements that do not fit neatly into standard employment categories, drawing tax and payroll teams into broader institutional risk management and communications.
Finally, the ambiguous status of PhD researchers increases the importance of precision in documentation and practice. Funding letters, postgraduate regulations, casual contracts and payroll records all need to align. Any inconsistency can undermine the rationale for treating a stipend as non-taxable or for excluding core doctoral activity from employment analysis.
In summary, the difficulty for university tax professionals is not uncertainty about the law, but the operational strain created by arrangements that sit close to the margins of employment. The current PhD model requires continual vigilance to ensure that:
The status of PhD researchers may be ambiguous in lived experience, but for tax teams, managing that ambiguity is a daily and increasingly exacting task.
