This article was published by the Great British Mag editorial team on 24 November 2020.
In the UK everyone, including students over 16 years of age, have to pay Income Tax on anything they earn. In this article we explain what Income Tax is and how much you are likely to pay as a student.
What is Income Tax?
Income Tax is collected by Her Majesty’s Revenue and Customs (HMRC) from UK residents on their earnings and goes towards funding things like education, health and public transport. And is paid on money you earn from a job, being self-employed or receiving income from other sources such as letting a property.
Do international students have to pay Income Tax?
In the majority of cases you will have to pay Income Tax as well as National Insurance contributions on any earnings from work you do whilst you are a resident in the UK, even if the employer is overseas. In some rare situations you may not be obliged to pay Income Tax because your home country has a double-taxation agreement with the UK. You can check if this is the case through the UK Government website
Do you have to pay Income Tax on money you bring into the country?
No, you will not have to pay Income Tax on money you bring into the country to fund your studies. Furthermore, you will not have to pay Income Tax on any funding you receive from a student loans company, bursaries, scholarships and grants.
How will I pay Income Tax?
If you get a part-time job and are paid using PAYE (pay as you earn), your Income Tax will be deducted automatically. Most part-time jobs will pay you this way, and you’ll see how much tax and National Insurance you’re paying on your payslip. Money earned from being self-employed or income from any other source, needs to be declared on your self-assessment tax return each year.
How much Income Tax do you pay on your earnings?
You can earn up to £12,500 in one financial year (which runs from April to April) and pay no Income Tax. In order to work out your income liability you can use a free online income tax calculator.
The table below will show you how much Income Tax you will need to pay depending on your earnings.
Band (England, Wales N. Ireland) | Taxable income | Tax rate |
| Personal allowance | Up to £12,500 | 0% |
| Basic rate | £12,501 to £50,000 | 20% |
| Higher rate | £50,001 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
Band (Scotland) | Taxable income | Tax rate |
| Personal allowance | £12,500 | 0% |
| Starter rate | £12,501–£14,585 | 19% |
| Basic rate | £14,586–£25,158 | 20% |
| Intermediate rate | £25,159–£43,430 | 21% |
| Higher rate | £43,431–£150,000 | 41% |
| Top rate | £150,000+ | 46% |
How to file your Income Tax return in the UK
If you have earned any money over the financial year, which is from April to April you need to complete a self-assessment form and submit it to HMRC.
You can do this by post and the deadline is 31 October or online and the deadline is 31 January.
In order to submit your self-assessment you will need a unique tax reference (UTR) number, which will appear on documents from HMRC, such as letters about your National Insurance Number, you can also get it by ringing HMRC on 0300 200 3310.
Can I be exempt from paying Income Tax?
You might be exempt from paying Income Tax if you fit into one of the following categories:
- Live in the UK for less than 183 days in one financial year
- Come from a country that has a double taxation agreement with the UK, whereby you do not need to pay tax on foreign income and gains which you bring to the UK for the purpose of paying for your educational costs
- Are employed overseas and the employer is sponsoring your studies but expects you to continue working whilst you are studying
- Students on a PhD stipend
Do I pay Income Tax if I have worked abroad?
If you normally live and study in the UK but do some work outside the UK, say during the summer holidays, you’ll need to pay Income Tax on those earnings if they exceed your personal allowance of £12,500.
You will need to include any earnings from oversees in your self-assessment tax return. If you are being charged tax in the country you have worked you can apply for a certificate of residence to prove you live and pay taxes in the UK. And if you have already paid tax on the earnings abroad you might be entitled to claim tax relief, from the UK government.
Do I pay Income Tax if I am self-employed?
Yes, you will have to declare revenue you have earned from being self-employed on your Self Assessment tax return. You will need to declare how much you earned and what expenses you incurred. This will then be added to any other income you have declared and HMRC will then work out how much tax you need to pay.
How do I claim back Income Tax if I have overpaid?
There may be situations where you have overpaid Income Tax and need to claim a refund, which you can do up to 4 years after the relevant tax year. Some of the circumstances in which you might be able to claim Income Tax include:
- Being put on an emergency or incorrect tax code – if you start a job without a P45 and the employer cannot ascertain your earnings in that financial year they might put you on an emergency tax code and you might end up paying more Income Tax.
- If you’ve paid tax and stop working part way through the tax year.
- Some degrees require you to take a placement year which typically runs from Sept to June, which means your earnings run over two financial years (the UK financial year runs from April to April) and this might give a misleading impression about how much they’ve earned and result in being taxed an incorrect amount.
In most cases HMRC will make the adjustments and refund the over payment. However, if you are no longer working and want to get your refund before the end of the financial year, which runs from April to April in the UK, you can claim the money back through a P50 form. For which you will need to be issued with a P45 from your former employer.
How long will it take to get the refund?
It typically takes five weeks for HMRC to deal with tax reimbursements and students can claim directly from HMRC online via their own personal tax account.
Can an international student claim back Income Tax?
If you are leaving the UK and have been paying Income Tax and want to find out if you are entitled to a refund you must complete a P85 form, which is a form that confirms you are leaving the UK permanently. Send it to HMRC, along with parts 2 & 3 of your form P45 that will be provided to you by your employer.
What is the fine if I do not pay Income Tax?
A fine of £100 applies on returns filed up to three months after the deadline. Over the following three months, a daily penalty of £10 may be charged. If the failure continues for more than 6 months after the filing date there is a further fixed penalty of either £300 or 5% of the tax liability (whichever is the greater) apply.
Further penalties apply for returns filed 12 months after the deadline – in some cases up to 200% of the tax liability.
If you don’t have all the information you need for your UK tax return, you may provide provisional figures in order to meet the deadlines. You should replace any provisional figures with the final ones as soon as you know them.
You may also want to read
How to apply for a National Insurance number
