Douglas Olsen
Students in the UK are liable to pay taxes like everyone else. If a student earns above the personal allowance, they will have to pay taxes. The tax you pay on earnings above the personal allowance is staggered, and the rate of income tax varies from person to person, depending on how much they have earned during the tax year. The current tax-free allowance is £12,500 per year, so if you earn more than this, you will have to pay tax. If you are self-employed and earn more than £1,000 in a tax year, you will need to complete a self-assessment tax return. International students may also qualify for limited exemptions under certain double taxation agreements.
| Characteristics | Values |
|---|---|
| Tax on foreign income | Foreign students do not pay UK tax on foreign income or gains as long as they are used for course fees or living costs. |
| Double-taxation agreements | Some countries have double-taxation agreements, which mean students might not need to pay UK tax on their income. |
| National Insurance | Students need to obtain a National Insurance number to work in the UK. They will pay National Insurance if they earn more than £1,048 per month. |
| Income Tax | Students will pay Income Tax if they earn over £12,500 per year. |
| Self-employment | Students who are self-employed need to fill in a Self Assessment tax return each tax year. |
| Tax reclaim | Students may be entitled to reclaim tax they've paid when they leave their job by filling in a form P85. |
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What You'll Learn
Foreign students and tax
If you are an international student in the UK, you may have to pay tax on your income or gains in the UK or overseas. Under UK domestic law, students have no special status in the UK tax system. Therefore, students are generally liable to pay UK tax and National Insurance contributions in the same way as other UK taxpayers.
However, 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. This includes money for maintenance, education, or research grants. If your income is over £15,000 in a tax year (excluding course fees), HM Revenue and Customs (HMRC) may ask you to account for your living costs.
Some countries have a ''double-taxation agreement' with the UK, which means you do not pay UK tax on your income if you work while studying. If your country does not have such an agreement, you will have to pay tax in the same way as others who come to live in the UK.
To work in the UK, you need to obtain a National Insurance number. This is a unique number that ensures your employer can pay your tax and National Insurance contributions correctly. You can apply for jobs and start work without a National Insurance number, but you must apply for one as soon as you find a job.
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Tax on income
If you are a student in the UK, you may or may not have to pay tax on your income, depending on a few factors. Firstly, it is important to distinguish between UK and international students. 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 the country they are coming from does not have a 'double-taxation agreement' that covers students, they may need to pay tax on their foreign income.
For UK students, the main types of tax that may be applicable are Income Tax and National Insurance. If you are a student and have a job, you will have to pay Income Tax and National Insurance if you earn over a certain amount. This amount is known as the 'personal allowance', which is currently £12,500 per year. You do not have to pay tax on this amount, but anything you earn above it will be taxed. The amount of tax you pay will depend on how much you earn, with higher income levels attracting higher tax rates.
If you are a full-time student with a holiday job, you may not need to pay tax through PAYE (Pay As You Earn), but you will still pay National Insurance if you earn more than the weekly threshold. You can ask your employer for a form P38(S) if you are a full-time student, only working during the holidays, returning to full-time education after the holidays, and your total income for the year is below the personal allowance.
It is important to note that if you work for a UK employer, you will likely have to pay UK tax on anything above your personal allowance, even if you are an international student. However, if you work for a foreign employer, you may not need to pay National Insurance in the UK, but you might have to pay tax contributions in the country you are working in.
To work in the UK, you will need to obtain a National Insurance number, which is unique to you and ensures your employer can correctly record your tax and National Insurance contributions.
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National Insurance
If you are a student in the UK, you may have to pay tax and National Insurance (NI) contributions if you decide to take up a job. The UK has two main types of tax: Income Tax and National Insurance. The amount of tax you pay depends on how much you earn.
If you plan to work while studying in the UK, employers will ask for your National Insurance number to process your wages and make necessary tax and National Insurance deductions. If you are a UK resident, you will automatically be assigned a National Insurance number when you turn 16. If you are an international student, you will need to apply for a National Insurance number once you arrive in the UK. You can start working before receiving your National Insurance number if you can prove you have the legal right to work in the UK.
Income Tax
You will not pay Income Tax on the first £12,570 you earn during the tax year. This is called your personal allowance. After that, the following 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
International Students
If you are an international student working in the UK, there are some double-taxation agreements, which could mean you might not need to pay UK tax on your income. However, if your country does not have this type of agreement, you will have to pay tax as others who come to live in the UK. 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.
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Self-employed students
If you are a student and choose to work for yourself, you are considered self-employed. This means that you will need to register as self-employed within three months of starting work and fill in a Self Assessment tax return each tax year, declaring your income and expenses. This allows HM Revenue and Customs (HMRC) to work out how much tax you need to pay.
There are different types of self-employment: limited company, sole trader, and partnership. A limited company is legally separate from you, which means that if your company goes bankrupt, your personal finances will not be affected. Registering your business as a limited company may also secure legitimacy when attracting new clients. You will need to register your company at Companies House, appoint a director, and have at least one shareholder. As a sole trader, if your business goes bust, you will be responsible for any losses your business makes, but you get to keep all profits after tax. You will need to keep records of spending and payments. A partnership is for those who want to go into business with someone but not become a limited company. You will share equal responsibility for any losses and divide any profits. You and your partner will have to pay separate taxes.
As a self-employed student, you are entitled to the same tax-free personal allowance as someone who is in a full-time job. For the year 2021/2022, the standard personal allowance was £12,570. This is how much you can earn before you start paying income tax. However, the personal allowance will change depending on how much you make in a year. For example, if you earned more than £100,000 a year, your personal allowance of £12,570 would reduce by £1 for every £2 of income.
National Insurance contributions are paid if you are over the age of 16, self-employed, and making a profit of at least £6,515 a year. If you are running a limited company, you will also have to pay Corporation Tax. If you are selling goods, you will need to submit a VAT return if you earn over the VAT threshold, which is currently £85,000 a year. You will need to manually pay your tax bill, which happens twice a year, in January and July. It is important to keep track of your finances when self-employed to ensure you have enough money saved to cover your tax bill.
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Tax thresholds and personal allowance
In the UK, Income Tax and National Insurance are the two main types of tax people pay when working. However, you only start paying these taxes once you earn above a certain amount. This amount is called the personal allowance. For the 2025/26 tax year, the personal allowance is £12,570. This means you do not pay tax on the first £12,570 you earn during the tax year.
After you earn more than £12,570, you will start paying Income Tax at a rate of 20% on amounts between £1,048.01 and £4,189 per month. If you earn between £4,189.01 and £12,500 per month, you will pay 40% Income Tax. Finally, if you earn more than £12,500 per month, you will pay 45% Income Tax.
Similarly, with National Insurance, you will not pay this tax on the first £1,048 you earn per month, which works out as £9,564 per year. After that, you will pay 12% National Insurance on amounts between £1,048.01 and £4,189 per month, and 2% on amounts over £4,189 per month.
It is worth noting that the personal allowance may be reduced for individuals with an income over £100,000. In such cases, the personal allowance decreases by £1 for every £2 that the individual's adjusted net income exceeds £100,000. As a result, if an individual's income is £125,140 or above, their personal allowance becomes zero.
Additionally, 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, this depends on whether the student's country has a ''double-taxation agreement'' that covers students. If not, they may need to pay tax on their foreign income in the usual way.
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Frequently asked questions
If you are a student in the UK, you may have to pay tax if you work. There are two main types of tax that people pay when working in the UK: Income Tax and National Insurance. The amount you pay will depend on how much you are earning. You will not pay Income Tax on the first £12,570 you earn during the tax year. This is called your personal allowance.
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, if your country does not have a 'double-taxation agreement' that covers students, you will have to pay tax in the same way as others who come to live in the UK.
If you work for an employer during your studies, any Income Tax and National Insurance contributions will be calculated and deducted from your wages before you receive your payment. This is known as Pay As You Earn (PAYE). If you are self-employed, you will have a different kind of tax payment system and will need to fill in a Self Assessment tax return each tax year.
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