Tax Rules for International Students in the UK
One of the main areas that concerns international students who are studying in the United Kingdom is the UK tax system. Many international students pay more tax in the UK than is required; therefore an understanding of the UK tax system is important to ensure you are not left out of pocket.
International Students Receiving Financial Support
Many international students receive financial support whilst they are studying in the UK. This comes in a variety of forms and consists of support such as scholarships & bursaries, family gifts, and personal savings accumulated before arrival in the UK. In the majority of cases, support such as this is not taxable in the UK.
International Students Receiving UK Income
Some international students may not have to pay UK tax on income they receive in the UK. This is the case when an international student is covered by a double-taxation agreement between the UK and their home country. This is likely to occur when an international student is being sponsored by an overseas employer.
If an international student works in the UK for a UK employer – they will be liable to pay both Income Tax and National Insurance on their earnings. The amount of income that is taxable (and at what rate) will depend on how much the international student earns. Most people in the UK can earn up to £10,600 per year tax free.
Bringing Foreign Income & Gains to the UK
International students are not usually liable to pay UK tax on foreign income and gains that they bring to the UK for their maintenance and education. This includes money used for course fees and living costs, such as study materials, accommodation, utility bills and food.
If the living costs of an international student exceed £15,000 in a tax year (6 April to 5 April) HMRC may require the student to account for these. This amount does not include money that is used towards course fees.
International Students with Foreign Income
International students who work at home (outside of the UK) during holidays and those who receive other foreign income (e.g. from renting out a property at home) usually do not have to pay UK tax on this income. This is because certain double-taxation agreements treat international students at ‘not resident in the UK’.
If no double-taxation agreement is in place between the UK and an international student’s home country, the student is classified as a UK resident if they are resident for 183 days or more.
When Do International Students Have to Pay Tax in the UK?
International students who come to the UK to study may need to pay tax on foreign income if they’re from a country without a double-taxation agreement for students. They may also be liable if they have other income that is not brought to the UK; or if they have income they bring to the UK and spend on things other than maintenance and education. When this is the case, international students are required to pay tax on their foreign income in the normal way.