Do Working Students need to pay Income tax and National Insurance?

If you are a student and doing a job, you may need to pay student tax. Student tax is of two types –

1. Income tax
2. National contribution

• Income tax – Income tax means tax on income of an individual. You are entitled to earn personal allowance before you start paying income tax. You are entitled to personal allowance of £11850 per annum and anything above this personal allowance will be taxed. For ex – If you are doing a part time job and earning less than £11850, you don’t have to pay anything but if your earnings are more than £11850, you have to pay 20% tax on your earnings and you will come under slab of £11850 - £46350. If your earnings are more than £46350, you will be liable to pay 40% tax on your earnings.
• National insurance – It is a contribution to state benefits and it is payable on income above £162 per week. In this case, you will come under slab of £162 - £892 per week and you will be charged 12% on your earnings. If you are earning more than £892 per week, you will be charged at 2%.

Employer usually deduct your income tax & national insurance from your wages through PAYE (Pay as you earn)

If You Overpaid The Tax

If you already paid the tax and left the job you were doing in the middle of the tax year, you can apply for a refund.

If You Are Self-employed

If you are working for yourself, you need to fill self-assessment tax return every year and declare details of your income & expenses to HMRC. HMRC will find out how much tax you have to pay.

Holiday Jobs Abroad

If you are studying & living in UK but working abroad during the holidays. You need to pay -

1. UK tax if it is above the personal allowance of £11850
2. National insurance contribution, if you are working for a UK employer.

Note – There is no need to pay national insurance contribution in UK, if you are working for a foreign employer but you might have to pay contribution in the country you are working in.

Foreign Students Working In Uk

If you are a student and from a country other than UK, you may not have to pay tax on your income as per some double taxation agreements. If your country doesn’t have an agreement with the UK, you have to pay tax in the same way like others paying in UK. International students in UK may have income arising from various sources outside UK. For ex- Working back home in vacations, interest earned on a bank account, renting out the property etc. Many international students don’t find any problem due to double taxation agreements with UK but professional advice is must for the students in any of the following situations –

1. A student has foreign income or gains and they bring it all to UK but their country has no double taxation agreement with UK.
2. A student has foreign income or gains and they bring some of them to UK but leave the balance of income or gains overseas.
3. A student has foreign income or gains that they bring to UK other than their education, maintenance or course fees.

You may have to pay UK tax on foreign income & gains depending on the residence and the domicile of the student.

How DNS Help?

If you are having any query or doubt regarding student tax, you can contact our DNS experts to understood whether you are liable to pay student tax or not. Our DNS expert contacts you for an initial free consultation and provides you the best advice. Our adviser will help you and tell you many other ways to save your tax, whether you are a resident of UK or not. You can call us at 03330603304 or e-mail us at enquiry@dnsaccountants.co.uk

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.