What happens when I leave the UK?

Updated on 27 April 2020

Migrants

There are a number of tax matters you need to consider when leaving the UK. These include the possibility of obtaining a tax refund and how you repay any student loan you may have when you are abroad. 

Group of international students in front of a Union Jack flag
(c) Shutterstock / Andrey_Popov

⚠️ The UK left the European Union (EU) on 31 January 2020 and entered a transition period, currently due to end on 31 December 2020, during which EU law continues to apply in the UK. The UK’s relationship with the EU beyond the end of the transition period has not yet been finalised. Please note that the guidance below reflects the law as it applied before the UK’s departure from the EU, and as it will continue to apply throughout the transition period.

Can I get an income tax repayment when I leave the UK? 

Many international students fail to claim a repayment of tax to which they are entitled when leaving the UK, for example, when returning home when they have finished their studies. 

Many students who work in the UK do so for only part of the year or they work part-time in several jobs. When this happens, the UK Pay as You Earn (PAYE) system may not deduct the right amount of tax and often deducts too much. 

Shortly before you leave the UK after studying here, you should complete a form P85 ‘Leaving the UK – getting your tax right’. This form tells HM Revenue & Customs (HMRC) that you are leaving the UK and makes a claim for repayment of any overpaid tax for the year of departure. 

If you have a form P45 from a former employer, you should send parts 2 and 3 to HMRC together with form P85. 

If you have overpaid tax and claim a repayment, HMRC will send you any tax refund that they owe you, but they will need your up-to-date address or a UK bank account to which they can make a direct transfer. Any repayment will be made in UK currency so make sure your bank account will accept the funds. 

You may have overpaid taxes in more than one tax year during your stay in the UK. You can tell HMRC about this when you submit form P85 and ask HMRC to repay you for all the tax years involved. However, there are time limits on when you can claim a tax refund. 

You should beware of various companies (often advertising online) which offer to claim back overpaid tax for taxpayers – many are not reputable, and others may charge high fees for a service that you can easily do for yourself. There is more information on these companies in our tax refund section. 

Can I get a refund of National Insurance contributions (NIC) paid in the UK? 

It is not usually possible to get a refund of NIC, but it might be possible to have them taken into account when determining eligibility for state benefits in another country.  

If you are returning to a country within the EEA, you will need to determine whether you can ‘aggregate’ periods of contributions in this way under the terms of the UK’s withdrawal agreement from the European Union. There is more information on this at How does the UK state pension work for migrants?, though we recommend you seek advice based on your personal circumstances. 

Alternatively, you may be able to take periods of contributions into account for determining benefit eligibility if you are returning to a country that has a social security agreement with the UK. 

Visit Do international students pay National Insurance contributions? for more information. 

Can I get a VAT refund? 

When people shop in the UK, they pay VAT on most things they buy. But there is a ‘VAT Retail Export scheme’ that allows certain people to claim back the VAT they have been charged on most of the goods they take out of the European Union (EU). The scheme will continue to apply during the Brexit transition period (currently scheduled to end on 31 December 2020). 

The scheme is normally advertised in UK shops as ‘Tax-Free Shopping’. Not all shops operate the scheme – if you are interested in using the scheme, look for shops displaying a Tax-Free Shopping sign or ask a shop assistant before you buy. 

HMRC Notice 704/1 Tax-free shopping in the UK explains how the Tax Free Shopping scheme works. 

⚠️ Please note the scheme does not include a number of items and the HMRC notice explains which items are excluded such as services. 

What happens to my student loan repayments if I leave the UK? 

In 1998, the UK introduced income-based or income-contingent loans. The main way of repaying these loans is via the UK tax system. Borrowers have to deal with both the Student Loans Company (SLC) and HM Revenue and Customs (HMRC) when they start paying back what they owe. 

Students who are eligible to take out a UK student loan have to make repayments through the UK tax system, in the same way as any other UK student borrower.  

Students who go abroad can no longer make loan repayments via the UK tax system. This means that if you received a UK student loan and you leave the UK for more than three months after finishing your course you must inform the SLC. The SLC will take over the collection of the repayments. 

It is important for students to take note of the repayment threshold relevant to the country to which they are going, as it is not necessarily the same as the UK threshold (2020/21 £19,390 per annum for Plan 1 loans and £26,575 for Plan 2 loans). From 2020/21, postgraduate loans are also collected at 6% of earnings above £21,000 per year. Thresholds vary according to comparison calculations between the cost of living in the UK and the other country.  

You can find more information on GOV.UK

What happens to my student loan repayments if I return to the UK after living abroad? 

Similarly, if you have been living abroad and return to the UK for three months or more, you should let the SLC know. This is important because if you find employment in the UK, you might need to start making repayments via the UK tax system again and you will need to cancel any separate arrangements that you have made with the SLC. 

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