Ah the gap year. It is now seen by many young people as the defining formative experience of their life, the once in a lifetime opportunity to get out there and see the world just before or after entry into higher education or further study. Whether we party our way throughout the tropical beaches of South-East Asia or devote a portion of our lives to humanitarian work in the developing world, gap years are now heralded as something we should all strive to participate in.
However, for many young people, the reality of transcontinental flights, accommodation and the inevitably humongous amounts of spending money that the gap year necessitates is a monetary nightmare. For those of you that believe the gap year is an economic pipedream and the folly of the trust-fund elite, fear not!
We at the NUS, in cooperation with The Low Incomes Tax Reform Group (LITRG) have composed a guide that will aid you in budgeting the holiday of a lifetime. Using these handy tips, a gap year of your own may reveal itself as something not only worthwhile, but actually an achievable goal.
- Get that tax refund! For many students, gap years are only a feasible life plan if they slave tirelessly at a job beforehand in order to save the money for their exotic excursion. In addition to this, gap years are usually structured around an academic timetable, meaning many of you will jet off during the summer to be back in time to begin your studying the following autumn. With the way in which the financial year works, this means that young people tend to be overtaxed on the hard earned money they have saved for their gap year. For the 2018/19 financial year, each working person is entitled to a personal, tax free allowance of £11,850 on the money they earn. The Pay As You Earn (PAYE) taxation system operates on the assumption that you will more-or-less be earning the same amount of money each payday, and therefore your personal allowance is spread evenly over the course of the financial year. This is bad news for students leaving for their gap year in the middle of the financial year, as they will not have been allocated the full amount of their personal allowance. So if you’re planning on saving before you set off across the globe, it’s a good idea to get in touch with HMRC and claim a tax refund to ensure you receive the maximum amount of travelling money that’s entitled to you. This may seem like a daunting and complex task at first, but the following handy guide will be able to guide you through the process: It’s entirely possible to claim a refund yourself using a P85 form, the process of which is outlined here .
- Work whilst travelling: For those students just itching to get out there and explore the world without having to spend months stagnating back here at home, working whilst you travel may seem like a more palatable idea. If this is your preferred modus operandi however, it’s a sensible idea to ascertain whether or not you’ll be subject to the dreaded double taxation procedure. Most people that travel temporarily remain within the UK tax net, meaning that you could potentially be taxed not only in the country your working in at that time, but being taxed back home in Britain to, a scenario literally no one wants to encounter. Nevertheless, if this terrifying situation occurs to you, a double taxation relief may be available. See here for more detail
- For the philanthropists among you: Of course, many young people consider the gap year experience to be a little more than simply getting leathered at a full moon party in Thailand and raving your way across the Australian hinterland. Volunteering is often a means through which many engage and enrich the globe whilst exploring and creating those lifelong memories drunkenly spouted during fresher’s week (a certain fishing metaphor comes to mind). Of course, we’re talking about volunteering. But even working for free doesn’t escape the taxation systems of many nations. Some countries regard you as a tax resident if you are within their borders over a certain period of time (this tends to be around 183 days) and will try to tax you on your earnings from the UK that you accumulated before your gap year begun. Therefore, we at the NUS strongly recommend you research your tax position in each country you plan to volunteer in before visiting to prevent unnecessary taxation. As stated above however, if you are taxed whilst volunteering abroad on income you were previously taxed in the UK on, then a double tax relief may be worth looking into.
- Exploit duty-free! If your gap year involves you leaving the European Union for over twelve months, then you may be able to take advantage of buying particular goods free of VAT; bonus! There are of course specific regulations and conditions in place that you’ll need to look into before taking this approach, which can be found here. Nevertheless, if you are able to make use of those retailers which operate the VAT Retail Export Scheme, you may have just discovered a nifty way of saving some precious spending money for your travels.
- Remember to consider your Student Loan. If you’re planning a year away after your studies and before launching a career of your own, be sure to consider Student Loan repayments in your budgeting. Luckily for the jet setters among us, as it stands you are only obliged to begin repaying your loans once you begin earning above the repayment threshold, which is £25,000 per annum. If you have a lengthy post-study excursion planned, it would be wise to get in contact with Student Finance UK so they can collect repayments from your overseas earnings where its appropriate. Be warned, they definitely will find you, even if you’re spending six months on the remotest of pacific islands! It is also important to realise that the repayment threshold may not be the same as the UK threshold as the Student Loan Company calculates different thresholds for different countries based on their cost of living. For many of you though, the threshold is high enough that it shouldn’t have any impact on your travelling expenditures at all.
We hope you enjoy your travels!!!!