Ibrahim Gardner
Students on placement years often have questions about whether or not they need to pay tax on their earnings. In the UK, students on placement years are usually regarded as full-time students and are therefore exempt from Council Tax. However, if a student has a paid placement, they may need to pay Income Tax and National Insurance on their earnings, depending on their income.
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What You'll Learn
Placement students pay income tax on earnings above their tax threshold
Students on placement years in the UK are required to pay income tax and National Insurance on their earnings over their personal allowance, which is currently £12,570 for the tax year from 6 April 2025 to 5 April 2026. This applies to both domestic and international students. It is important to note that placement students are still considered full-time students for Council Tax purposes and are typically exempt from paying it.
During a placement year, students may find themselves in two different tax years, which can complicate their tax situation. In such cases, it is essential to keep all pay-related documents, as they may be needed to claim tax refunds after the placement ends. Students can use HMRC's tax checker or contact them directly to determine if they have paid too much tax.
Placement earnings are not limited to salary but also include interest from savings and earnings from other employment, including part-time jobs before or after the placement. Students should be aware that their employer will typically deduct income tax and National Insurance contributions through Pay As You Earn (PAYE) payroll software. However, if a student is a contractor or self-employed, they may need to manually declare their taxes.
While placement students do pay National Insurance contributions, the amount varies depending on their weekly earnings. For the tax year 2024/25, students will need to pay National Insurance if they earn more than £242 per week, with a contribution rate of 10% on any amount exceeding this threshold.
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Placement students pay National Insurance Contributions
As a placement student, you will have to pay National Insurance Contributions (NICs) if you earn above a certain threshold. The amount you pay will depend on your weekly income. For the tax year 2024/25, you will have to pay National Insurance if you earn more than £242 per week, and you will be taxed 10% on any amount above this threshold.
Placement students often find that their employer calculates their tax correctly for the first part of their placement, but many students end up paying too much tax during the latter part. This is because placements often run across two different tax years, which means that the threshold may change. For example, the earnings allowance for the tax year 6th April 2025 to 5th April 2026 is £12,570. If your placement falls into two different tax years, you may be taxed during the second part of your placement. However, you can claim back any overpayment from HMRC (His Majesty's Revenue and Customs) by completing a form using the information on your P60 and P45.
It is important to note that, as a student, you may have gaps in your National Insurance Contributions due to not working full-time. While you can make voluntary NICs to fill these gaps, it is not necessarily financially beneficial to do so. To claim any state pension, you need 10 years of full contributions, and 35 years of contributions to claim the full state pension.
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Students on placement are exempt from Council Tax
Students on placement are subject to income tax and National Insurance contributions, but they are exempt from Council Tax.
Income Tax
Students on placement are required to pay income tax on their earnings above their personal allowance. The personal allowance, or earnings allowance, is the amount of money one can earn before paying tax. For the tax year from 6 April 2025 to 5 April 2026, the earnings allowance for all UK residents is £12,570. Any amount of money earned above this will be taxed at a rate of 20%.
National Insurance
Students on placement are also required to pay National Insurance contributions. The amount paid depends on the income earned each week. For the tax year 2024/25, National Insurance must be paid if the student earns more than £242 in a week, and 10% of any amount above this will be taxed.
Council Tax
Students on placement are considered full-time students and are therefore exempt from Council Tax. To ensure exemption, students may need to show their Local Council a student status letter as proof of their student status.
Claiming Tax Refunds
Students on placement may end up paying too much tax and can claim back tax overpayments from HMRC (His Majesty's Revenue and Customs). This can be done by completing a form using information from one's P60 and P45. Students can also use HMRC's tax checker tool to determine if they have paid too much tax.
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Students can claim back tax overpayments from HMRC
Students on placement years often find that their employer calculates their tax correctly for the first part of their placement, but they end up paying too much tax during the second part. This is because the placement falls into two different tax years, and the employer may not have all the necessary information to perform the proper calculation.
If you are a student and you think you have overpaid your taxes, you can claim back a tax overpayment from HMRC (His Majesty's Revenue and Customs) by completing a form using the information on your P60 and P45. You can also request a refund for paying more income tax when you submit your Self-Assessment tax return. The UK government provides a useful HMRC tax refund check tool to verify whether you need to file a return.
If you are unsure about your tax code or have any other questions, you can contact an adviser from the Student Funding and Advice Team, or ask HMRC to ensure your tax code is right.
It is important to note that if you continue to work after your placement, your tax may even out, and you may not be entitled to claim anything back.
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Students on placement can apply for funding or scholarships
Students on placement are typically subject to income tax once they exceed their tax threshold. This threshold varies by country and tax year. For example, in the UK, the earnings allowance for the tax year from 6 April 2025 to 5 April 2026 is £12,570. Any amount earned above this is taxed at a rate of 20%. While placement students may pay the correct amount of tax, it is common for students to end up paying too much tax, in which case they can claim back the overpayment from the relevant tax authority.
Students on placement can often access funding or scholarships to support their financial needs. For instance, at Aston University, Home or EU students with full or pre-settled status can apply for a tuition fee loan from Student Finance England or Student Finance Services. They may also qualify for a placement scholarship, which can be requested as a tuition fee waiver or bank transfer. Unpaid placements at Aston University qualify for a reduced level of maintenance loan unless they qualify as unpaid service. International students facing sudden and unexpected financial hardship can apply to the Susan Cadbury Fund for support.
In the United States, there are various scholarships and programs that provide funding for students, including the Thomas R. Pickering Foreign Affairs Fellowship, Udall Undergraduate Scholarship, Harry S. Truman Scholarship, Fulbright-Hays Doctoral Dissertation Research Abroad Fellowship, and many others. These scholarships often aim to support students pursuing specific fields of study, such as foreign service, public service, global health research, or oceanic and atmospheric science.
Additionally, several universities worldwide offer fully funded scholarships for international students, including Yale University, ETH Zurich, Ton Duc Thang University, Monash University, Gates Cambridge, Stanford University, KAIST University, Chevening, and Simmons University Kotzen. These scholarships typically cover tuition fees, living expenses, and other related costs, such as travel or insurance.
Students on placement should research the specific funding opportunities available through their educational institution and explore external scholarships or grants that align with their field of study and personal circumstances. By combining different sources of funding and scholarships, students can gain financial support to help cover the costs associated with their placement year.
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Frequently asked questions
If you are on a UK-based paid placement, you will have to pay income tax and National Insurance on earnings that are over your personal allowance. This includes international students.
The earnings allowance for the tax year 6th April 2025 to 5th April 2026 is £12,570. Any amount of money you earn over this will be taxed at a rate of 20%.
Your placement employer will usually deduct income tax and National Insurance from your wages through Pay As You Earn (PAYE). If you think you've paid too much tax, you can use HMRC's tax checker to find out.
You can claim back a tax overpayment from HMRC (His Majesty's Revenue and Customs) by completing a form using information from your P60 and P45.
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