Lana Oconnell
Students in the UK who are working may have to pay Income Tax and National Insurance if they earn over the income threshold of £12,500 per year. This threshold is known as the 'Personal Allowance'. However, some students may be exempt from paying UK tax on their income, for example, if they are international students from a country with a 'double-taxation agreement' in place. Additionally, full-time students with holiday jobs may not need to pay tax through PAYE, but they will still pay National Insurance if they earn above the weekly threshold.
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What You'll Learn
Foreign students and tax
Foreign students in the UK usually do not pay UK tax on foreign income or gains, as long as they are used for course fees or living costs. However, if your living costs are over £15,000 in a tax year (excluding course fees), HM Revenue and Customs (HMRC) may ask you to account for this.
It is important to check whether your country has a 'double-taxation agreement' with the UK that covers students. If there is such an agreement in place, you may not need to pay UK tax on your income if you work while studying. If there is no such agreement, you will have to pay tax in the same way as others who come to live in the UK.
If you are a foreign student with a holiday job in the UK, you may not need to pay tax through PAYE, but you will still pay National Insurance if you earn over the weekly threshold. If you have a part-time job during term time, you cannot use form P38(S) for your holiday job, and your employer will handle the paperwork to ensure you do not pay too much tax.
If you are self-employed, you will need to fill in a Self Assessment tax return each tax year, declaring your income and expenses. This allows HMRC to work out how much tax you need to pay. You must register as self-employed within three months of starting work.
If you are a foreign student in the UK with income or gains, there are several UK tax considerations that may be relevant to you. For example, if you are from outside the EEA and Switzerland, the rules may vary depending on your country. You can consult the UK Council for International Student Affairs to check the position for your country.
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Self-employed students and tax
If you're a student in the UK with a job, you'll need to pay income tax and National Insurance if your income is over a certain amount. This applies to both full-time and part-time students, and even if you work abroad during the holidays or are an international student working in the UK.
If you're a full-time student with a holiday job, you may not need to pay tax through PAYE (Pay As You Earn). However, you will still need to pay National Insurance if you earn above the weekly threshold. You can request a form P38(S) from your employer if you meet certain criteria:
- You're a full-time student in the UK, only working during the holidays
- You're returning to full-time education after the holidays
- Your total income for the year is below the personal allowance
If you're self-employed while studying, you won't have an employer to handle your tax and National Insurance contributions. Instead, you'll need to register as self-employed with HM Revenue and Customs (HMRC) within three months of starting work. You can do this by calling the Newly Self-Employed helpline. Each tax year, you'll need to fill out a Self Assessment tax return, declaring your income and expenses so that HMRC can calculate your tax liability.
Being self-employed offers several benefits, such as flexibility, the ability to choose your clients, and potentially paying less tax by offsetting work expenses. However, it's important to remember that self-employment also comes with financial risks, unpredictable income, and additional responsibilities like preparing invoices and managing your reputation.
If you normally live and study in the UK but work abroad during the holidays, you're still considered a UK resident for tax purposes. You'll be liable for UK tax on any income earned above the personal allowance. If you're taxed by your overseas employer and cannot claim tax back from foreign authorities, you may be able to claim a deduction or credit in the UK.
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Holiday jobs and tax
If you're a full-time student with a holiday job in the UK, you may need to pay tax and National Insurance, depending on how much you earn. If you work for yourself, you'll need to fill in a Self Assessment tax return each tax year, declaring your income and expenses.
Holiday jobs in the UK
If you're a full-time student with a holiday job in the UK, you may not need to pay tax through PAYE (Pay As You Earn). You can ask your employer for a form P38(S) if:
- You're a full-time student in the UK, only working during the holidays.
- You're returning to full-time education after the holidays.
- Your total income for the year is below the personal allowance.
If you have a part-time job during term time, you can't use form P38(S) just for your holiday job. Your employer will take care of the paperwork to make sure you don't pay too much tax. If you think you've overpaid tax, you can use the student tax checker to see if you could get a refund.
Working abroad during the holidays
If you normally live and study in the UK but work abroad during the holidays, you'll still count as a UK resident for that tax year. You'll need to pay:
- UK tax on anything you earn above your Personal Allowance.
- National Insurance if you work for a UK employer.
If your overseas employer also taxes you, you'll probably be able to claim a deduction or credit in the UK.
Double-taxation agreements
Some countries have double-taxation agreements, which mean you don't pay UK tax on your income if you work while studying. If your country doesn't have such an agreement, you'll need to pay tax like anyone else living in the UK.
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Tax thresholds
If you're a student in the UK, you may need to pay Income Tax and National Insurance depending on your income. The UK government's tax calculator can help you determine how much tax you need to pay.
Income Tax
Income Tax in the UK is a tax you pay on money you earn from working. However, you must earn above a certain amount to start paying. Each person has a personal allowance of £12,500, which is the current rate. You do not have to pay tax on this amount. If you earn more than £12,500 a year, you will have to pay tax. The following tax rates apply when calculated monthly:
- For amounts between £1,048.01 - £4,189 per month, you will pay 20% Income Tax.
- For amounts between £4,189.01 - £12,500 per month, you will pay 40% Income Tax.
- Over £12,500 per month, you will pay 45% Income Tax.
National Insurance
National Insurance is another tax that you pay on your earnings. Similar to Income Tax, you must earn above a certain amount to start paying. You will not pay National Insurance on the first £1,048 you earn per month, which equates to a yearly amount of £9,564. The following rates apply when calculated monthly:
- For amounts between £1,048.01 - £4,189 per month, you will pay 12% National Insurance.
- For amounts over £4,189 per month, you will pay 2% National Insurance.
Foreign Students
Foreign students usually do not pay UK tax on foreign income or gains, as long as they are used for course fees or living costs. However, HM Revenue and Customs (HMRC) may ask you to account for your living costs if they exceed £15,000 in a tax year, excluding course fees. Additionally, some countries have double-taxation agreements, which mean you do not pay UK tax on your income if you work while studying.
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Tax treaties
In the UK, if you're a student with a job, you'll typically need to pay income tax and National Insurance if your earnings exceed a certain threshold. This applies to both part-time and full-time students. However, there are some tax treaties and exemptions in place for students, particularly regarding foreign income and double taxation agreements.
The UK has tax treaties with various countries, including the United States, as outlined in Article 20 of the US-UK tax treaty. This treaty states that payments received by a student or business apprentice who is a resident of one contracting state (in this case, the UK) and is present in the other state (the US) for full-time education or training shall not be taxed in that state, provided that the payments arise outside of that state and are for education, maintenance, or training purposes. This exemption applies to a business apprentice for a period not exceeding one year from their arrival in the contracting state for training.
Additionally, foreign students in the UK are usually exempt from paying UK tax on their foreign income or gains, as long as they are used for course fees or living costs. However, this exemption depends on the existence of a ''double-taxation agreement' between the UK and the student's home country. If such an agreement is in place, foreign students can avoid paying UK tax on their income if they work while studying. Without such an agreement, foreign students are subject to the same tax obligations as other individuals coming to live in the UK.
It is important to note that tax treaties and agreements can vary from country to country, and specific conditions may apply. Students should refer to the relevant government websites or seek expert advice to understand their specific tax obligations or benefits under applicable tax treaties.
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Frequently asked questions
If you're a student in the UK with a job, you'll have to pay income tax and National Insurance if you earn over a certain amount. The current minimum income to start paying tax in the UK is £12,500 per year.
Foreign students do not usually pay UK tax on foreign income or gains, as long as they are used for course fees or living costs. However, if your country does not have a double-taxation agreement with the UK, you will have to pay tax.
If you're a full-time student with a holiday job, you may not need to pay tax through PAYE, but you will still pay National Insurance if you earn over the weekly threshold.
Students are usually exempt from paying council tax, but this may vary depending on the local council's rules.
Self-employed students in the UK will have a different tax payment system, and they may be entitled to pay less tax. However, they need to keep an eye on the tax rules and register as self-employed within three months of starting work.
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