National Insurance and Tax

All students working in the UK (whether home, EU or international students) are liable to pay national insurance and income tax. The amount of both you will pay depends on the amount you earn. You have to pay income tax and national insurance whether you are employed by someone else or self-employed.

International students should make sure that they are entitled (ie, that their visa allows them to) work whilst in the UK. Please note that having a national insurance number or a tax code does not automatically mean that you have the right to work in the UK. The University’s International Office has more guidance for international students hoping to work in the UK.

The information in this section is a guide only. If you need specific advice, please speak to a Just Ask adviser or contact HMRC.

+ National Insurance

You pay national insurance contributions to build up your entitlement to certain state benefits. You have to pay national insurance contributions if:

  • you're an employee or self-employed and you're aged 16 and over; and
  • your earnings are more than a certain level (the “earnings threshold”).

The earnings threshold for the tax year 2014/2015 is £153 per week, and £155 per week for 2015/2016: but this changes every year.

If you're employed, you pay what are known as Class 1 Contributions. The rates for these are:

  • for earnings of £153 a week up to £805 a week, you pay 12 per cent of the amount you earn between £153 and £805
  • if you earn more than £805 a week, you also pay 2 per cent of all your earnings over £805.

Your national insurance contributions will be deducted from your wages by your employer.

+ Income Tax

Income tax is the tax levied on people’s income per year in the UK. The amount you pay will depend on how much income you receive and your status.

Don’t forget that the tax year (April 6 to April 5) is different to the academic year! This means that any earnings you receive in your holidays will be taxed in the relevant tax year, not academic year.

+ Income

Income includes earnings, tips and interest on most types of savings. If you’re a home student, it doesn’t include your Government student loan. For international students, some overseas funding may be liable to tax and you should contact HMRC if you have any concerns about whether or not you should pay tax on your funding. You are allowed to earn a certain amount (your “personal allowance”) per tax year before you start paying income tax. This varies from year to year, but for the tax year 2014/2015 the personal allowance is £10,000. Certain other allowances may be available depending on your circumstances. These include the blind persons’ allowance and increased allowances for people over 65. HMRC’s guide to allowances has a more comprehensive overview.

You can’t just wait until you have earned your full allowances before paying tax. Your allowances are for the whole tax year, so if you are paid monthly your allowances are divided by 12 (eg £10,000 ÷ 12 = £833.33 per month) and if you’re paid weekly they are divided by 52 (eg £10,000 ÷ 52 = £192.31 per week). This gives you the maximum per month/week you can earn tax-free: you only pay tax on amounts earned over that figure. So, if you’re paid monthly and earn £833.33 or less in a month, you won’t pay tax that month. If you earn £839.33 you will pay tax on £6 (£839.33 - £833.33).

+ Status

Students don’t have to pay income tax if:

  • you only work in the holidays
  • you’re returning to full-time education after the holiday
  • your total income for the tax year that holiday falls in is less than your personal allowance(s)

If all three criteria apply to you, ask your employer for a P38S (Student Employees) form - and tax won't be deducted from your earnings. You still have to pay national insurance if you’re over the earnings threshold.

International Students working in the UK will normally pay UK income tax and national insurance as normal. However, you may be entitled to reclaim tax you've paid when you leave the UK by filling in a form P85 and sending it to HMRC. More details on form P85 can be found here.

If you work overseas (for example, in the holidays), but normally live and study in the UK, you will still be liable for UK tax on anything you earn overseas which is above your personal allowance(s). If your overseas employer also taxes you and you aren’t able to claim that tax back from the relevant authority overseas, you can probably claim a deduction or credit back in the UK.

+ How much tax?

The Government sets the rates at which we pay tax in its budget every year. HMRC publish the rates here.  

If you think you have paid too much tax, use HMRC’s student tax checker to see if you can claim a refund. If you can, details of how to claim can be found on the DirectGov website.

Income tax is normally deducted from your pay by your employer and passed to HMRC under the pay as you earn (“PAYE”) scheme. It is your responsibility to pay tax, though the responsibility of calculating your tax, deducting it from your wages and passing it to HMRC is your employer’s.