Are you wondering how much a child can earn in the UK before paying tax? Then read on because in this guide you’ll find out what age children start paying tax, the type of tax they pay and what they need to declare to HMRC. It’s great if your child is earning, but it pays to know exactly what the rules state so you’re ahead of the game.
Updated 27 November 2021
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Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
1. What Age Do Children Start Paying Tax?
Income tax is related to earnings, not age. That means children must pay tax on their earnings regardless of their age. The amount of tax they pay depends on how much a child earns and the income tax allowances and reliefs they are entitled to. Children only start to pay National Insurance once they reach the age of 16 and over.
The amount of tax an individual pays depends on how much they earn. Read more about income tax bands in this guide.
2. When to Register Your Child with HMRC
When a child’s income earns over £1,000 during one tax year. they need to register with HMRC. Below £1,000 they can choose to take advantage of the trading income allowance. This is where UK individuals can earn up to this amount without letting HMRC know. That £1,000 amount relates to income, not profit and it isn’t always tax-efficient to use. Therefore, you should check whether using the trading allowance is right for your child and if you should register with HMRC regardless of turnover.
3. How to Register Your Child With HMRC for Taxes
Once your child’s income crosses the £1,000 income threshold during a tax year, it’s time to register with HMRC. This means registering as self-employed. You can do online yourself by filling in the form on the HMRC website. I’ve put together a guide to registering as self-employed where I show you the form you need to use and the 5 steps you need to take to complete your registration.
4. How Much Can a Child Earn Before Paying Tax in the UK?
A child can earn £1,000 tax-free by utilising the trading income allowance during the tax year.
Once their income goes over £1,000, they can then earn up to £12,570 in profit for the tax year 2021/2022 without paying tax because of the personal allowance. This is the amount that everyone in the UK is entitled to earn tax-free. Even if your child has no tax to pay, they must still register as self-employed and let HMRC know about your earnings. Once their profits go over the tax-free amount they’ll start to pay income tax as follows:
- 20% (basic rate) on profits between £12,570 to £50,270
- 40% (higher rate) on profits between £50,271 to £150,000
- 45% (additional rate) over £150,000
If your child has other forms of income then you’ll pay income tax based on their combined earnings.
Once your child reaches the age of 16, they’ll need to pay National Insurance. They won’t pay any NI if they earn up to the tax-free thresholds. Here are the National Insurance rates for the 2021/2022 tax year:
- Class 2 National Insurance £3.05 per week on profits over £6,515 per year
- Class 4 National Insurance. 9% on profits between £9,658 and £50,270 and 2% on profits thereafter
5. How Do I Find My Childs National Insurance Number?
Your child will be issued with a national insurance number once they turn 16. It’s automatically sent to you around the time of their birthday. At this point, they will need to start making national insurance contributions whether they work for themselves or someone else.