The International Student’s Guide to Tax

Posted in Student Life by nadiabanc on February 6, 2020

 

Starting university can be daunting, but if you’re moving to the UK from another country, making the trip overseas can be more overwhelming than usual. With more things to factor in compared to non-international students, preparation and planning are essential.

One of the areas you’ll need to consider is the UK’s tax system and how it may affect you as an international student. Broadly speaking, you should find that your tax situation is similar to most UK students, though there are some special tax and National Insurance rules that affect those moving to the UK to study.

 

Here, our guide seeks to clear up any issues that surround international students and tax during their time studying in the UK.

 

Is the financial support provided to international students taxable in the UK?

 

While they’re studying in the UK, there are a number of different ways that international students can get financial support for themselves, including:

 

  • Scholarships or bursaries
  • Family gifts
  • Personal savings accumulated before coming to the UK

 

In most circumstances, such support won’t be taxed in the UK and can be ignored, but as the below will show, there are instances where certain earnings, loans and foreign income can be taxed.

 

Barista serves customer

 

Can I work while studying in the UK?

 

Your eligibility to work in the UK during your studies depends on the country you’re from and your immigration status. Generally, the following applies:

 

  • If you’re from a European Economic Area (EEA) country or Switzerland, you can work in the UK without the need for permission, though you’ll need your passport or ID in the event you’re asked by your employer for proof of identity.
  • If you’re from outside of the EEA, then it’s worth checking the UK Council for International Student Affairs’ website to check if are eligible to work during your studies.

 

Are the earnings of international students taxable in the UK?

 

If you’re seeking a job with a UK employer during your studies, then you will have to pay tax and National Insurance contributions on these earnings. There are, however, certain rare occasions where double taxation agreements allow income earned in the UK to be ignored. This occurs only when your overseas employer is sponsoring you and expects you to work in the UK when you aren’t studying.

 

Are international students exempt from National Insurance contributions (NIC)?

 

Though they have to pay NIC if they’re working, there are some situations where international students may be exempt. This depends on:

 

  • Whether the student is from a European Economic Area (EEA) country and has come to the UK with an A1, E101 or E102 certificate, showing that they’re exempt under special rules until the certificate expires.
  • If the student is from a country which has a reciprocal social security agreement with the UK, they may unable to obtain an exemption from NIC. To view a list of countries which has this agreement with the UK, head to the Department of Work and Pensions (DWP) website.

 

A young man in a coffee house

 

Are international students’ maintenance and education payments taxable in the UK?

 

Students who come directly from a country that has a double taxation agreement with the UK may not need to pay tax on foreign income and gains which are brought to the UK and used for their maintenance or education. Here are definitions of what maintenance and education tax exemptions may cover:

 

  • Maintenance: money used to fund living expenses such as goods and accommodation.
  • Education: money needed to buy materials for studying such as books and other resources.

 

However, the amount they can put towards paying for these depends on their country’s double taxation agreement with the UK. In practice, if a student brings £15,000 or less to the UK in a tax year, HMRC would expect the money to be used for maintenance. Money that is used to pay for course fees does not count towards this £15,000 limit, so can be brought to the UK in addition to it. HMRC may ask you to account for your living costs if they are more than £15,000 in the tax year.

 

Are foreign income and gains brought by international students taxable in the UK?

 

International students in the UK are entitled to foreign income or gains, i.e. money from sources outside the UK. This can come in the form of earnings from working back home on vacation, letting out a foreign property, or from interest on a foreign bank account, to name but a few examples. This money should be free from tax if they are moving from a country with a double taxation agreement entered into by the UK. You can find the current double taxation agreements here.

 

Man calculating finances

 

However, there are certain situations where these gains may be taxed, even if the student is only staying in the UK for a short period of time while they study. Professional advice should be sought in the event of the following:

 

  • A student has foreign income or gains which they bring to the UK, but the student comes from a country that has no double taxation agreement with the UK.
  • A student has foreign income and gains and they bring some of them to the UK, but leave the balance of the income or gains overseas.
  • A student has foreign income or gains that they bring to the UK for reasons other than maintenance, education or course fees.

 

Depending on the student’s residence, there may be some UK tax to pay on the foreign income and gains.

 

Do international students pay council tax?

 

International or not, all students are exempt from paying council tax (an annual charge on domestic dwellings that contribute towards public services). If you’re living in University-owned accommodation or are in a property occupied only by full-time students, then you don’t have to pay council tax. If, however, you find yourself living with non-students, you’ll have to pay some council tax.

 

If you’re looking for a student living experience that offers more, head over to the NIDO STUDENT site or drop us a line on 0207 1000 100 for more information on our student residences.