Tax Advice For International Students In The UK

According to a report, “International students coming to London contribute £2.3 bn towards the economy”, and the money they spent in London supports over 70,000 jobs.

This means foreign students would not be turned away any time soon, despite plans to reclassify migration targets.

While there are plenty of advantages when studying in the UK, there is one problem every student must face – income and gains tax. Whatever they earn in the UK is taxable, and the same thing is true with foreign income or gains. As if dealing with the local tax is not hard enough, right? But there is no escaping the tax man. So the best recourse is to gain a better understanding of the UK tax rules.

As an international student, it is possible for you to earn money from sources outside of the UK. That short stint you had in a retail shop during your holiday back home is subject to tax. It is the same with any interest earned from your overseas bank account or investment, or any money you made from letting out a property in your home country.

How you are taxed, depends on the arising basis which is closely related to your residence position. Are you a resident or not?

  • If you work and study in the UK for less than 2 years, you may
    not become a UK resident.
  • If you work and study in the UK for 183 days or more in a tax
    year, you are considered a resident unless double taxation
    agreement says otherwise.
  • If you come from a country with new double taxation agreement
    to the UK and you stayed in the country for 183 days or more in the
    tax year, you will be considered and treated as a UK resident.

Based on your resident position, you will have a pretty good idea of the arising basis of your taxation.

Domiciled and resident in the UK, you will pay tax on your worldwide income and gains for the tax year that they arise. Whether or not you bring your foreign income or gains to the UK, the tax treatment will be the same all throughout. Things will only get complicated if you are not domiciled and resident in the UK.

The result being that then, you might need to complete Self Assessment tax returns, and deal with double taxation rules. The only benefit that you will gain from arising basis is that your personal allowance for income tax and the amount of annual exemption for capital gains tax are retained.

If you are resident but not domiciled in the UK, you can take advantage of the remittance basis of taxation instead. In this case, it is only the foreign income and gains brought (remitted) into the UK will be taxable. Still, this can be a complicated process for international students with foreign income or foreign gains.

This is why it is highly recommended that an international student like you should seek professional advice when it comes to taxation of foreign income and gains, even if you only stay in the UK for short period of time. But the more you are going to need professional help if you find yourself in the following situations:

  • You come from a country with no double taxation agreement with
    the UK
  • You bring some of your foreign income and gains into the UK but
    leave the rest of it overseas

However, if you bring your foreign income or gains mainly as funds for your maintenance, education or course fees, you may be exempt from paying UK tax.If you need to speak to someone about your tax liability as an International Student in the UK, click HERE to speak to our agents

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