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I am an international student, and I will work in an internship this summer. I will work for 3 months (actually, a bit less: 12 weeks). My salary is 65,000£ gross per annum on a pro rata basis, that is, 5416£ per month.

I am not sure how much taxes I should pay. In total I will receive 15,000£, so does that mean that I should pay taxes as if my salary was 15,000£ a year, as this year in total I will earn 15,000£? In this case I think I would take home £13,367.20. Moreover, I have heard that in UK there are some tax deductions for the first job one gets in the country, but I am not sure if this is true.

  • What internship pays pro-rata of a £65k salary? I'm obviously working in the wrong industry! Even banking only pays about £35-40k for fresh graduates, and interns are normally on less than graduates. – AndyT Jan 13 '17 at 15:49
  • @AndyT It is an Associate internship in the Quantitative Research area of a major bank in London. – user7985 Jan 19 '17 at 22:09
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Yes, in the end you should pay tax as if you got £15,000 in a year. However tax will normally be withheld on the assumption that you'll keep getting the same monthly rate until the end of the tax year (April 5th), and you'll need to claim that back later from HMRC.

This being your first job in the country won't affect the final tax you pay, but it will mean that your employer won't deduct tax as if you've been earning money this tax year before starting work for them, so it'll mean you get less withheld now that you then have to claim back later.

You'll also have to pay National Insurance. That's charged weekly or monthly rather than on an annual basis, so you won't get much/any benefit from the short period of your employment.

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  • Thank you. Yes, I imagined that the company would withheld part of the money so that I will have to claim it later, we have the same thing in Spain. Can I claim part of what I pay to National Insurance? – user7985 Jan 10 '17 at 9:10
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    @J.Garcia probably not, as National Insurance is calculated weekly/monthly so the amount that's taken will be correct. You might end up entitled to some UK state pension from them, though. – GS - Apologise to Monica Jan 10 '17 at 9:15
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Your overall tax due will depend on your salary for the whole tax year. While you are working you will be taxed each pay period (may be monthly or weekly) on a "year to date" basis. Unfortunately the UK tax year starts in April (specifically on the 6th of April)

Lets assume you have had no other UK jobs in the tax year, that your employer has filed the correct paperwork with HMRC and your employer pays you three equal payments of £5000 late in July, August and September. In July you will pay relatively little tax (I make it about £166 assuming no pension contributions, possibly zero if you have pension contributions), because you will have have four months allowances to go at but in August and September you will pay significantly more (I make it about £800, again assuming no pension contributions). Assuming you do no further significant work in the tax year then this will represent a substantial overpayment of tax as in the end you should only pay about £500 for the tax year.

If you fill out tax returns this will be squared-up at tax return time, but most people in the UK don't have to fill out tax returns and while it's possible to opt-in to filling them out they tend to be a bit of a pain.

My approach in such circumstances (though with rather smaller amounts of money involved, congrats on the high-paid internship) was to wait until the tax year is over, then write a letter to HMRC outlining how much tax I had paid, how much I thought I should have paid and asking them to confirm my calculations and return the overpaid tax.

On top of the tax you will also have to pay national insurance, unlike income tax this is reckoned per pay period. So there won't be any refunds due. Expect to pay about £430 per month in NI.

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