Tax - Working in the UK - British Council

WORKING IN THE UK



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	Tax

If you are coming to live and work in the UK you need to know about the system of taxation. Find out below about the UK tax system, and whether you will be liable to pay tax.

		Should I contact the tax office when I arrive?

	Yes, even if you do not currently have any income, it may be useful for you to let the tax office know your circumstances. You can do this via a P86 form, issued from HM Revenue and Customs.

		Do I have to pay tax in the UK?

If you are going to be living and working in the UK you will usually have to pay tax here as well. However, if you have income which is from a foreign country and is taxed in that country, you may be entitled to an exemption from paying tax in the UK when there is a double taxation agreement in place. Some double tax agreements also allow teachers, professors and in some cases researchers, to come to the UK for a period of 2 years or less and be exempt from UK tax on their earnings from their teaching or research post. As the terms of double taxation agreements can vary widely, you are advised to refer to the text of the relevant agreement in HMRC’s Double Taxation Relief Manual. You can find out more about residency and your liability for tax on the Directgov website, in the HM Revenue and Customs leaflet IR20, or at your local tax office.

		What type of taxes might I have to pay?

The most probable types of tax that you will have to pay are:

			Capital Gains Tax This is a tax on any profit from an asset which you have sold or given away. For example, if you sell a house which was not your main home, you would have to pay Capital Gains Tax on the profit that you make. You do not have to pay Capital Gains Tax when you sell a house which you have been using as your home. More information on the DirectGov website.
			Income tax This is a tax on all your income, including wages, interest from savings and investments, and rent from any property you own. You will also have to pay income tax on pensions and on certain benefits. More information on the DirectGov website.
			Stamp duty If you buy property for ₤125,000 or more, you have to pay Stamp Duty Land Tax. If you buy shares, you may also have to pay a type of Stamp Duty. More information about Stamp Duty on the DirectGov website.

There are other types of taxes, such as inheritance tax and taxes on goods and services. For more information visit the Directgov pages on tax.

		Do I have to pay income tax on a grant or fellowship?

Under most double taxation agreements, if you are visiting the UK solely for the purpose of full-time education or training, you will not pay tax on payments from outside the UK for your maintenance, education or training. Therefore PhD students would not normally have to pay tax on their grants from outside the UK. However, if you are a post-doctoral researcher, you will probably have to pay tax in the UK, unless there is a specific agreement between the UK and your home state exempting you from paying tax on your income from your research post.

Postdoctoral researchers may be engaged:

			As employees of a university or research establishment – in which case tax is deducted from salary by the employer.
			As self-employed professionals working in partnership with a university or research establishment – in which case the individual researcher should complete a tax return and pay tax directly to HM Revenue and Customs through the year.

		How much income tax will I have to pay?

The amount of income tax you have to pay depends on how much you earn.

For the tax year 2007/2008 the first ₤5,225 that you earn is tax free (personal allowance), and after that you must pay tax at different levels:

			10% on the next ₤2,230
			22% on the amount from ₤2,231 to ₤34,600
			40% on anything above ₤34,600

The personal allowance is different for blind people and the elderly. For more details on income tax allowances and tax bands, visit the HM Revenue and Customs website.

		What is a tax year?

	The tax year runs from 6 April to 5 April. If you come to settle in the UK in the middle of a tax year you will often only have to pay tax on income from the moment that you arrive, but there are exceptions to this. Find out more at the Direct Gov website.

		How do I pay income tax?

If you are employed, income tax and national insurance contributions will be automatically deducted from your salary (Pay As You Earn: PAYE), and you will not normally need to fill in a tax return each year. If you are self-employed, or have a substantial income from property or other means (for example foreign income), you will need to fill out a self assessment tax form. When you inform HM Revenue and Customs of your circumstances, they should determine whether you need to fill in a self assessment form, and will give you guidelines on how to do this.

		What are national insurance contributions?

	You pay national insurance contributions (NIC) to build up your right to social security, benefits and a pension. NIC are automatically deducted from your wages or will be calculated from your self assessment tax return. For more information about National Insurance visit Directgov or our pages on Social Security and Benefits.

		Where can I find out more?

	To find out more, visit the HM Revenue and Customs website, where you can find contact details for your local tax office.