What is the tax residence position of international students?

Updated on 8 July 2020

Migrants

The residence position of students who come to the UK is determined under the Statutory Residence Test just as for any other individual. We publish general guidance here. However, working out UK residence status can be hard for overseas students given their potential patterns of presence, so here we offer a detailed case study. 

Image showing international students holding flags from around the world
(c) Shutterstock / Anna Murashova Photo

An overview

If you have income while you are studying in the UK, whether earned or from investments and whether from the UK or overseas, you may need to pay tax in the UK and/or file a tax return. In order to work out whether this is the case, you may need to assess whether or not you are resident in the UK for UK tax purposes. Broadly, if you are not UK resident then you are only taxable in the UK on your UK-sourced income. If you are UK resident, then you are generally taxable in the UK on your worldwide income.

Students may have income from sources other than employment or investments, such as scholarship or grant income, which may be exempt from UK tax. If income is exempt, it is not taxable in the UK. There are also special international rules which can apply if your overseas employer is sponsoring you during your training or if you receive certain payments from sources outside the UK for maintenance, education and training. Please see Do international students pay UK tax? for more information.


▶️ Tip: If you are entitled to a UK personal allowance (for example, if you are an EEA citizen or UK national) and your worldwide income in a particular UK tax year (6 April to 5 April) does not exceed the UK personal allowance (for 2020/21, this is £12,500), you will have no UK tax to pay for that year, irrespective of your residence status.


Where you need understand your residence status in the UK, this is done using the Statutory Residence Test. You will also need to understand your residence status in your home country under the domestic law in that country. You may also need to consider your residence status in a third country if you are spending a significant amount of time there, such as where you may spend a year studying overseas.

We provide general guidance on how to work out your residence status in the UK in our residence and domicile pages.

Students are not subject to any special rules when it comes to working out your residence status under the Statutory Residence Test. In brief, the Statutory Residence Test consists of three parts:

  • a set of ‘automatic overseas tests’ (if you meet any of which you will be non-resident in the UK);
  • a set of ‘automatic UK tests’ (if you meet any of which, and no automatic overseas tests, you will be resident in the UK); and
  • a ‘sufficient ties test’ (effectively a tie-breaker if none of the automatic tests are met).

The tests are generally objective and depend on your specific circumstances.


▶️ Tip: If you spend 183 days or more in the UK during the tax year, you will always be resident in the UK for that year.


However, if you spend fewer than 183 days in the UK during that tax year, working through the Statutory Residence Test if you are an overseas student studying in the UK can be difficult. This is partly because the academic year (usually from September to July) is not aligned with the tax year (from 6 April to 5 April) and the fact that the Statutory Residence Test is very much focussed around where you have a ‘home’ and whether you carry out full-time work in the UK or overseas.

Students are very unlikely to meet the tests for full-time work in the UK or overseas while they are studying, even if they carry out full-time work for a few weeks outside of term time. This is because in order to be considered to be carrying out full-time work in the UK or overseas under the Statutory Residence Test, you must do so over a much longer period (generally a year).

Furthermore, given that students normally have a ‘home’ in their home country and a term-time residence in the UK, it can be unclear where a student should consider that they have a ‘home’ for the purpose of the Statutory Residence Test.

Where the tests which consider a taxpayer’s home (or in some cases, homes) and full-time work are inconclusive, it is normally necessary to consider what ‘ties’ that taxpayer has to the UK and compare this with the number of days spent in the UK. This can be a fiddly and detailed assessment.

In order to assist you, we set out below a detailed case study of how the Statutory Residence Test might work for Jan, a student from Germany studying in the UK. It is important to bear in mind that each situation is unique, and you should take advice if you are in doubt. The case study below is given for illustrative purposes only.

A case study: Jan

Jan is from Germany and is a postgraduate at the Royal College of Music in London. Prior to this he was a full-time student in Germany, being supported by his parents. For the first year of his 2-year course, starting in September 2020, he spends term time in the UK and other times of the year in Germany.

Jan works full-time in his uncle’s bar during the holidays when he is in Germany. In addition, he earns money in the UK on a self-employed basis, as a professional singer. He has not previously been tax resident in the UK or spent any significant time in the UK. He is single and has no children.

In 2020/21, he earns £7,000 from his bar work in Germany (including tips) and £8,000 in the UK from performance fees.

Part 1

Jan spends the following number of days in the UK during the 2020/21 academic year:

Term Dates Number of days Tax year
Autumn term 21 September to 11 December 2020 82 2020/21
Spring term 11 January to 26 March 2021 75 2020/21
Summer term 26 April to 11 June 2021 47 2021/22


For Statutory Residence Test purposes, we need to count the number of days on which the taxpayer is present at midnight at the end of the day (subject to certain exceptions). In assessing your own residence status, you should ensure you count the days accurately.

Jan spends a total of 157 days (82 + 75) in the UK during the 2020/21 tax year.

Working through the Statutory Residence Test for 2020/21, we note first that none of the applicable automatic overseas tests are met:

Test Description Met? Reason (N.B. in some cases there may be more than one reason why a test is not met)
First automatic overseas test You were resident in the UK in one or more of the three previous tax years and you spend fewer than 16 days in the UK in the tax year under consideration No Not previously resident in the UK
Second automatic overseas test You were resident in the UK for none of the previous tax years and you spend fewer than 46 days in the UK in the tax year under consideration No Spends more than 46 days in the UK
Third automatic overseas test You work full-time overseas for the tax year under consideration, and you spend fewer than 91 days in the UK, and you work for more than three hours in the UK on fewer than 31 days No Although Jan works full-time overseas during the holidays, he would need to do so over the course of the whole year to meet this test


Jan is therefore not automatically non-resident in the UK. Now we need to consider whether any of the automatic UK tests are met:

Test Description Met? Reason (N.B. in some cases there may be more than one reason why a test is not met)
First automatic UK test You spend 183 days or more in the UK in the tax year under consideration. No Jan only spends 157 days in the UK during 2020/21
Second automatic UK test

You have a home in the UK, you are present there on 30 or more separate days in the tax year, and for at least 91 consecutive days while having that UK home (including at least 30 in the tax year) you either have:

  • no overseas home; or
  • no overseas home other than homes at which you are present on fewer than 30 days in the tax year

TBC

This is not immediately clear, so look at this in more detail below.

Third automatic UK test

You work full-time in the UK for 365 days or more with no significant break from UK work. No Jan does not work full-time in the UK


We now need to consider the second automatic UK test in more detail. The conditions for the test can be difficult to fully understand, but broadly it is asking if Jan has his ‘only home’ in the UK.

What is a ‘home’ for the purpose of the Statutory Residence Test?

The law defines a ‘home’ for this purpose as any building or structure which the individual uses with a ‘degree of permanence or stability’. It does not include holiday homes or similar properties which are used for temporary purposes, and it does not need to be a property the individual owns. It is possible to have two or more ‘homes’ or even no home at all.

The required ‘degree of permanence and stability’ may be established over a relatively short timescale and does not require that the individual expects to remain in that accommodation permanently.

HMRC publish a list of factors to be considered when trying to work out whether or not somewhere counts as a ‘home’ but basically it will depend on the facts and circumstances of the case.

If a student has accommodation provided in halls of residence, strictly for the duration of term time and this is not available outside of term time (let’s say the room is used by the university for conference accommodation or other events), it could be argued that their term-time accommodation is not used with the required degree of permanence and stability to count as a home.

On the other hand, if a student lives in private rented accommodation (say in their second and subsequent years) which is available permanently throughout the academic year, then it becomes more likely that this will be treated as a ‘home’ in the UK.

Jan establishes that his UK accommodation is not available outside of term-time and concludes based on all the circumstances that he does not have a ‘home’ in the UK. As such, he does not need to consider the test further.


▶️ Tip: For students, it can be easier to consider first whether or not you have a home overseas before considering whether you have a home in the UK. If you continue to have a home overseas throughout the tax year and you are present at that home for at least 30 days in the tax year, you cannot meet the second automatic UK test. In Jan’s case, this would been an alternative way to establishing that he did not meet this test.


Jan is not automatically UK resident for 2020/21. However, he may be resident in the UK regardless if he meets the sufficient ties test. This considers the number of days spent in the UK against the number of ‘ties’ an individual has to the UK. The greater the number of days spent in the UK, the fewer the number of ‘ties’ required to trigger residence. Let’s apply the test to Jan.

Knowing that Jan spends a total of 157 days in the UK during 2020/21, by looking at the appropriate table, we know that just two ties to the UK will be ‘sufficient’ to make him resident in the UK for that year. The potential ties are:

Tie Descripton Met? Reason
Family Has family resident in the UK No Jan is single and has no children, therefore he does not have any ‘family’ for this purpose.
Accommodation

Has accessible accommodation available in the UK – note that HMRC say that the difference between “accommodation” and a “home” is that accommodation is more transient and does not require stability or permanence.

No Although Jan has ‘accommodation’, the accommodation must be available to be used by the individual for a continuous period of at least 91 days in the tax year. In Jan’s case, this condition is not met as it is only available in term time.
Work Works in the UK (for more than 3 hours in a day) on at least 40 days in the tax year Yes On at least 40 days in the year, Jan spends more than 3 hours on rehearsals and performances for his self-employed work.
90-day Spends more than 90 dys in the UK in either of the previous 2 tax years No We assume this is the case, because Jan is not previously resident in the UK or spent any time significant time here.
Country tie Spends more days in the UK than any other country N/A This does not apply to Jan as he was not previously resident in the UK.


Here we can see that Jan only has one tie. But he needs at least two to become resident in the UK under this test, so we can conclude that the sufficient ties test is not met.

As a result, he concludes that he is non-resident in the UK for 2020/21.

This means that he does not need to worry about his German income being taxed in the UK.


▶️ Tip: If Jan had been resident in the UK under the Statutory Residence Test, and he also remained resident in Germany under German tax law, his next step would be to look at the double tax agreement between UK and Germany to see in which country he is considered ‘most’ resident for the purposes of the agreement.

The ‘tie breaker’ provisions of the double tax agreement will determine where Jan is ‘most’ resident.

This can sometimes be an easier assessment – it might be that Jan is ‘treaty-resident’ in Germany for the purpose of the agreement even if he is resident in the UK under the Statutory Residence Test. If he is, then the double tax agreement says that his German employment income should only be taxed in Germany, essentially giving the same result as being non-resident under the Statutory Residence Test. However, strictly speaking this requires a formal ‘claim’ under the double tax agreement, which would normally be submitted as part of a Self Assessment tax return.


Even though Jan is non-resident under the Statutory Residence Test (and/or treated as non-resident for the purposes of the double tax agreement), he will still be taxable in the UK on his UK-sourced income.

As regards his performance fees, these are treated as UK self-employment income. Jan will need to register to file a Self Assessment tax return in order to declare the income, although there will be no tax to pay (because the £8,000 income will be within his UK personal allowance of £12,500).

Jan should also check whether or not his UK performance fees are within scope of German tax.

Part 2

In the 2021/22 academic year, Jan rents a private house with some friends from 1 September 2021. He continues to return to Germany during holidays and continues his bar work there.

In the 2021/22 tax year, he earns the same amount from his bar work (£7,000) but manages to earn £10,000 in performance fees.

In the 2021/22 tax year, he spends the following days in the UK:

Term Dates in UK Number of days spent in UK
Summer term (2020/21 academic year) 26 April to 11 June 2021 47
Autumn term (2021/22 academic year) 1 September 2021 to 15 December 2021 106
Spring term (2021/22 academic year) 6 January 2022 to 31 March 2022 85
  Total 238


Here, we can see immediately that Jan will be resident in the UK for the 2021/22 tax year, because he spends more than 183 days in the UK.

The consequence of this is that his worldwide income will be potentially within scope of UK tax for the 2021/22 tax year. However, if Jan remains resident (and is treaty resident) in Germany, his German bar income should be only taxable in Germany under the double tax agreement. The double tax agreement effectively overrides the UK position under domestic law.

Jan should also check whether or not his UK performance fees are within scope of German tax.

It is worth noting that an individual is usually either UK resident or non-UK resident for a full tax year. While there are rules that allow you to ‘split’ the tax year when you are coming to the UK (into effectively a non-resident part and a resident part, which restricts the UK’s ability to tax your ‘pre-arrival’ income) the opportunities to do so are limited for students.

In any case, as we have explained, for Jan, it should be possible for him to make a claim under the double taxation agreement to restrict the UK’s ability to tax his German income (including any ‘pre-arrival’ German income from the period 6 April to 25 April). In effect, this secures the same result as split-year treatment, but just in a more roundabout way.


▶️ Tip: Even if a student is tax resident in the UK, they may escape UK tax on foreign income and gains (that are not exempt from UK tax under a double tax treaty) by virtue of their non-domicile status. This applies automatically where they have foreign income and gains which are not brought to the UK of less than £2,000 for the year. Alternatively, students who work in the UK and have a small amount of foreign employment income may qualify for an exemption on their foreign income if certain conditions are met.

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