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UK Foreign Students: Tax matters to Attend When Leaving
Did you previously study and work in the UK? Were you able to claim are payment of your tax when you left for the UK? If you returned home without doing so, you could be entitled for a tax refund.
If you are still studying in the UK, there are several tax related matters that also concern foreign students like you.
If you worked part of the year or part time while studying in the UK, the PAYE (Pay as You Earn) system has likely deducted tax from your earnings. In most cases, especially when working in several jobs, deduction may be too much. This is why after studying and working in the UK, you must complete aform P85 Leaving the UK – getting your tax right. This tells HM Revenue customs (HMRC) that you are leaving the UK and wants to claim repayment for any overpaid tax. Make sure to indicate if you overpaid taxes for more than one tax year during your stay. If you have a form P45 from your previous employer, send parts two and three of it, together with the form P85, to HMRC.
Unlike other countries, student loans are paid via theUK tax system, which means both are correlated. If you studied in the UK before 1998, however, you may have taken out amortgage-style loan, which is treated and repaid differently. Following 1998, all student loans are now on either income-based or income-contingent loans, and use the tax system for repayment.
If what you have is an income-contingent loan, it is important that you check if you have a Plan 1 or Plan 2 loan, which varies in their repayments periods. In the case of a Plan 1 loan, deduction of repayment will start at the beginning of the tax year in 2015 and only if you earn over the repayment threshold which is £16,910 for the 2014/2015 tax year. Repayments for Plan 2 loan, on the other hand, will be collected via the tax system by April 2016.
So what happens if you leave before repayments will be collected? If you leave the UK for more than 3 months, you must inform the Student Loans Company (SLC) so that they can take over the repayment collection, since the UK tax system would no longer be applicable. To ensure that you pay the exact loan amount, check that therepayment thresholdto the country where you are going is the same as in the UK.
What if you return to the UK with student loans still unpaid? You would have to reverse the process, starting by informing SLC so that the UK tax system will be used again in collecting any repayment. This is important so that separate repayment arrangements will be cancelled.
National Insurance Contributions (NIC)
If you work in the UK, you have to pay NIC especially if you are a full-time student in higher education. If you come from a country within the European Economic Area or where there is a social security agreement in the UK, you may be eligible for a refund of any contributions you made to National Insurance. You also get to enjoy the benefits from the UK when you retire.
Whether you have questions regarding overpaid tax, student loan or NIC, it is best to seek reliabletax professionalsfor sound advice.