Are you wondering how much a child can earn in the UK before paying tax? 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.
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.
When 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.
How Much Can You Earn Before Paying Tax in the UK?
You can earn up to £1,000 before paying tax in the UK by taking advantage of the trading income allowance.
Once your income goes over £1,000, you can then earn up to £12,570 in profit for the tax year 2022-23 without paying tax because of the personal allowance. Even if you have no tax to pay because your business made a loss, you must still register as self-employed and let HMRC know about your earnings. Once your profits go over the tax-free amount you’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 you have other forms of income then you’ll pay income tax based on your combined earnings.
If you’re over the age of 16, you’ll need to pay National Insurance – if you’re self-employed you’ll need to pay class 2 and class 4 NI. You won’t pay any NI if you earn up to the tax-free thresholds. Here are the self-employed national insurance rates for the 2022-2023 tax year:
- Class 2 National Insurance £3.15 per week on profits over £6,725 per year
- Class 4 National Insurance 10.25% on profits between £9,880 and £50,270 and 3.25% thereafter.
You can read more about self-employed tax in this guide and see some examples of how it’s calculated.
How to Register Your Child With HMRC for Taxes
The quickest and easiest way to register your child with HMRC is to register as self-employed. The deadline for registering is the 5th October following the end of the tax year your child started earning or once their income goes over the £1,000 limit.
There are other business structures out there including a Limited Company which may offer better tax savings depending on your earnings. Read this guide to find out about the most popular UK business structures
How Do I Find My Childs’s 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.