Updated on 6 April 2024

Studying abroad

There are many opportunities to travel abroad as a UK student: you might consider going abroad for some time during your studies, perhaps for an academic year as part of an arranged study placement or work scheme. You may even decide to apply to do your whole course in an international institution – there are options from full degrees to doctorate programmes. During a summer break, you might want to do some volunteering or go on a working holiday. Whether you are going to study or work, there are tax points to consider.

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Overview

Broadly speaking, students studying abroad are liable to UK tax and National Insurance contributions (NIC) in the same way as other people living overseas (although students may receive sources of financial support which are generally not taxable in the UK).

See our pages on Leaving the UK for more general information on the topic.

However, students studying abroad are more likely to have certain patterns of presence and working circumstances. Below, we provide two examples of the UK tax considerations someone studying abroad might have to consider.

Please note that the foreign tax rules have been discussed for the purpose of the illustrations only and should not be taken as reflective of the true New Zealand or Australian tax positions.

See also our Studying abroad examples page.

Example – treaty resident in the UK with UK employment income

Mary is on a gap year and leaves the UK to go to New Zealand for around four months on 1 July 2024 after her exams. She does not earn any money in New Zealand – instead she volunteers in an animal sanctuary. She returns to the UK on 1 November 2024 but already knows that she wants to go back to New Zealand as soon as possible. She works hard over the Christmas period and by 15 January 2025 has saved up enough money to return to New Zealand, where she stays, travelling around, until May 2025.

Under UK rules, Mary remains UK tax resident for 2024/25 even though she has less than 183 days of physical presence in the UK. This is because she has her only home in the UK (albeit her parent's home) for all or part of the year. She is therefore taxable in the UK on her worldwide income.

Under New Zealand's rules, Mary is tax resident there from the date of her first arrival in July 2024 until May 2025 (due to being there for more than 183 days in a 12-month period) and so they may want to tax her worldwide income in this period too. This leaves her Christmas job income potentially subject to both UK and New Zealand tax, due to her being treated as tax resident in both countries.

For this period of dual residence, Mary looks at the double tax agreement between the UK and New Zealand. She decides that she only has a permanent home in the UK. It is unlikely that she will be considered to have a permanent home in New Zealand – but even if this is the case, her centre of vital interests appears to be in the UK and therefore we arrive at the same outcome. This means that Mary is treated as 'treaty resident' in the UK and 'treaty non-resident' in New Zealand – these special treaty rules override the actual position as regards the income covered under the treaty.

As non-residents in New Zealand (including those that are only non-resident by virtue of the treaty tie breaker tests) are not taxable on employment income sourced outside of that country, New Zealand must give up its right to tax Mary on her UK employment income and it will be taxed in the UK only.

It is worth noting that had Mary worked in a restaurant (say) in New Zealand, rather than gone travelling there when she returned in January 2025, then this income could give rise to another double taxation situation for her to tackle. However, New Zealand would not give up its right to tax Mary on her restaurant income due to it being sourced there. Double taxation would have to be avoided on this particular source of income in the manner described in the example below.

Example – treaty resident in the UK with UK and foreign employment income

Mark is on a gap year and leaves the UK in August 2024 for a five-month working holiday to Australia. He works in various bars, earns the equivalent of £5,000 and pays Australian tax at the non-resident tax rate of 32.5% (£1,625). Mark also earned £1,200 a month (no tax deducted) from a casual job he had in the UK for the other 7 months of that tax year.

Under UK rules, he remains UK tax resident due to the 183-day rule, so he is taxable in the UK on his worldwide income. Mark is not resident in Australia, but the employment income is Australian ‘source’, so it is also correctly taxable there. In this scenario, instead of just being able to exclude the income from one of the countries’ remits, the double tax treaty tells Mark that Australia has the main right to tax the income. This means that if the UK also wants to tax it (under its own rules) then the foreign tax credit method should be used to avoid double taxation.

A foreign tax credit will be limited to the UK tax liability on the foreign income, meaning that you will always end up paying at the higher of the two rates overall.

Mark’s 2024/25 UK tax calculation looks like this:

Income

£

Income

£8,400 (£1,200 x 7 months) + £5,000

13,400
Less personal allowance

-12,570
Taxable income

830
Tax

£
UK tax @ 20%

166
Foreign tax credit £1,625*

-166

*limited to the amount of UK tax charged
Tax due/refund

Nil

We can see here that there is no UK tax ultimately due on the Australian income. The foreign tax credit means that Mark only ends up paying Australian tax on his Australian income at the Australian rates. It is a different method of preventing double taxation. This is the method of double tax relief that you will come across most often where you have remained tax resident in the UK but have employment income arising in another country.

See our page on Double taxation for more information on doubly-taxed employment income.

Employer-sponsored courses

There are a number of ways that you can get funding for your studies through bursaries, grants and loans.

Sometimes you might also get help from an employer if the course is relevant to a job that you are doing or have been offered (upon your graduation, for example). You can read about the tax position in the UK on our Training page under the heading Employer-sponsored courses.

Some employers may only award sponsorship for the final year of study. However, some employers will fund all of your studies from the first year onwards if you have impressed them while on a vacation or work experience placement, for example. So, it follows that this could cover some time studying or working abroad.

Typically, such payments are not taxable in the UK or overseas, under double taxation agreements (for more information, see our page UK tax for international students in the UK).

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