Ibrahim Gardner
In the UK, students are generally liable to pay tax and National Insurance contributions in the same way as other taxpayers, provided they are earning over a certain amount. However, there are some exemptions and variations for international students. For example, 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. Additionally, students from certain countries may be exempt from paying UK tax on their income if they work while studying, due to double-taxation agreements. It is important for students to understand their tax residence status and any relevant double-taxation agreements to ensure they are compliant with UK tax laws while studying and working.
| Characteristics | Values |
|---|---|
| Student work tax liability | If you're a student and you have a job, you'll have to pay Income Tax and National Insurance if you earn over a certain amount. This still applies if you work abroad during your holidays, and if you're a foreign student working in the UK. |
| Income tax exemption | You will not pay Income Tax on the first £12,570 you earn during the tax year. |
| Income tax rates | 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 | Students pay National Insurance if they earn more than the weekly threshold. |
| National Insurance rates | For amounts over £4,189 per month, you will pay 2% National Insurance. |
| Self-employed students | Students who work for themselves need to fill in a Self Assessment tax return each tax year, with details of their income and expenses. |
| Foreign students | Foreign students usually do not pay UK tax on foreign income or gains, as long as they’re used for course fees or living costs. |
| Double taxation agreements | Some countries have double-taxation agreements that mean students do not pay UK tax on their income if they work while studying. |
| Tax residence status | Students should work out their tax residence status and, for tax years up to and including 2024/25, their domicile status to understand how this affects their liability to UK tax. |
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What You'll Learn
Foreign students and UK tax
Foreign students in the UK do not usually pay UK tax on foreign income or gains, as long as they are being used for course fees or living costs. This includes money for maintenance and education or research grants. However, if a student's living costs exceed £15,000 in a tax year (excluding course fees), HM Revenue and Customs (HMRC) may ask them to account for their expenses.
Additionally, foreign students may be exempt from paying UK tax on their income if their country of origin has a 'double-taxation agreement' with the UK that covers students. If such an agreement is not in place, foreign students may be required to pay tax on their income in the same way as others who come to live in the UK.
It is important to note that under UK domestic law, students do not have a special status in the UK tax system. Therefore, students are generally liable to pay UK tax and National Insurance contributions, just like other UK taxpayers. The amount of tax payable depends on the student's income, with a personal allowance of £12,570 per year, above which Income Tax becomes payable.
Furthermore, the right to work in the UK as a foreign student depends on the country of origin and immigration status. For instance, citizens of EEA countries and Switzerland did not need permission to work in the UK before 31 December 2020, but a visa may be required for those arriving in the UK on or after 1 January 2021.
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Self-employed students and tax
If you are a self-employed student in the UK, you will need to fill out a Self Assessment tax return each tax year. This is because, unlike regular employees, you won't have an employer to sort out your tax and National Insurance for you. In your Self Assessment, you must declare your income and expenses for the tax year, allowing HM Revenue and Customs (HMRC) to work out how much tax you need to pay.
You must register as self-employed within three months of starting work. The Self Assessment tax return is also used to report any student or postgraduate loan repayments. If the Student Loans Company (SLC) has said your repayments were due to start on or before 6 April of the year you are completing your return for, you must complete the student or postgraduate loan repayment section. Your student loan Plan 1, 2 or 4 deduction will be calculated based on 9% of your total Self Assessment income above the threshold of your repayment plan type. Your postgraduate loan deduction will be based on 6%. If you are repaying both a student and a postgraduate loan, you will need to complete both sections and will be due to repay 15% of your total income above the threshold.
It is important to know the rules regarding tax in your home country when working in the UK. Some countries may require you to declare earnings made in the UK and file a tax return there. If you are an international student, you usually do not pay UK tax on foreign income or gains, as long as they are used for course fees or living costs. However, you should check that your country of residence has a 'double-taxation agreement' that covers students. If it does not, you will have to pay tax in the same way as others who come to live in the UK.
In the UK, everybody can earn a certain amount before they start paying Income Tax. This is called your personal allowance. For the 2022-2023 tax year, you will not pay Income Tax on the first £12,570 you earn. After that, you will pay 20% Income Tax on monthly earnings between £1,048.01 and £4,189, 40% on monthly earnings between £4,189.01 and £12,500, and 45% on monthly earnings over £12,500. You can use the UK Government's tax calculator to find out how much tax you will pay on your earnings.
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Student jobs and tax
Students in the UK are liable to pay tax and National Insurance contributions in the same way as other taxpayers, depending on how much they earn. However, there are some exemptions and variations depending on the nature of the work and the student's country of origin.
Part-time work during term-time
If you have a part-time job during term-time, your employer will deduct any Income Tax and National Insurance contributions from your wages before you receive them. This is known as Pay As You Earn (PAYE). You do not need to pay tax on the first £12,570 you earn during the tax year (6 April to 5 April the following year). This is called your personal allowance. If you earn between £1,048.01 and £4,189 per month, you will pay 20% Income Tax; between £4,189.01 and £12,500 per month, you will pay 40% Income Tax; and over £12,500 per month, you will pay 45% Income Tax. For amounts over £4,189 per month, you will pay 2% National Insurance.
Holiday jobs
If you are 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 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.
Self-employment
If you work for yourself, you will need to fill in a Self Assessment tax return each tax year, with details of your income and expenses. HM Revenue and Customs (HMRC) will then calculate how much tax you need to pay. You must register as self-employed within three months of starting work.
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, this depends on whether the country has a ''double-taxation agreement'' that covers students. HMRC may ask for more information if the relevant amounts exceed £15,000 a year (excluding course fees). Some countries may require you to declare earnings made in the UK and file a tax return in your home country.
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Tax residence status
A person's tax residence status in the UK is dependent on how many days they spend in the UK during the tax year, which runs from 6 April to 5 April the following year. An individual will be considered a UK resident for tax purposes if they meet one or more of the automatic UK tests or the sufficient ties test and do not meet any of the automatic overseas tests.
The automatic UK tests include:
- Spending 183 days or more in the UK during the tax year.
- Having only one home, which was in the UK for 91 days or more in a row, and visiting or staying in it for at least 30 days of the tax year.
If an individual does not meet the criteria for the automatic UK tests, they may still be considered a UK resident if they meet the sufficient ties test. This test takes into account various factors, such as the number of days spent in the UK, the location of their family and economic ties.
For students, determining tax residence status can be more complex due to their frequent travel between their home country and the UK. Students are unlikely to meet the tests for full-time work in the UK or overseas while studying, even if they work full-time during holidays. Additionally, the concept of 'home' can be ambiguous for students, as they may have a residence in their home country and a term-time residence in the UK.
It is important to note that tax residence status can change from one tax year to the next, and individuals should check their status if their situation changes. For example, a student who spends a significant amount of time in the UK during their studies may become a UK resident for tax purposes, even if they were previously considered a non-resident.
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Student tax exemptions
Students in the UK may be exempt from paying certain taxes. This depends on factors such as their income, citizenship, and whether they are working while studying. Here is an overview of tax exemptions for students in the UK:
Income Tax
Students working in the UK may be exempt from paying Income Tax if they earn below a certain amount. For the tax year 2022-2023, individuals do not pay Income Tax on the first £12,570 they earn. This is known as the personal allowance. Income above this threshold is taxed at different rates depending on the amount.
National Insurance
Students who work may also be subject to National Insurance contributions. This tax is calculated differently from Income Tax. For monthly earnings above £4,189, individuals pay 2% National Insurance. Students need to obtain a National Insurance number to work in the UK, which ensures their contributions are correctly recorded.
Council Tax
Full-time students in the UK may be eligible for a discount or exemption on their Council Tax bill. To qualify, students must meet specific criteria, such as being enrolled in a full-time course for at least 21 hours per week for the majority of a calendar or academic year. The exemption or discount applies to the property where the student resides, and all occupants who are full-time students may be considered. In some cases, spouses, civil partners, or dependants of students may also be disregarded for Council Tax purposes if they are not British citizens and are not allowed to work or claim benefits.
Foreign Students
Foreign students in the UK are typically exempt from paying UK tax on foreign income or gains, provided 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 not in place, foreign students may be required to pay tax on their foreign income.
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Frequently asked questions
Generally, students are liable to pay UK tax and National Insurance contributions in the same way as other UK taxpayers. However, you only pay tax on income above the personal allowance of £12,570 per year.
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 the income is over £15,000 per year, HMRC may ask for more information.
If you are an international student working in the UK, you will have to pay UK tax and National Insurance, as long as your country does not have a double-taxation agreement with the UK.
If you work abroad during the holidays, you will still count as a UK resident for tax purposes and will be liable for UK tax on any income above the personal allowance.
If you are self-employed, you will need to fill in a Self Assessment tax return each tax year and pay tax on your income above the personal allowance.
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