Do under 18s and 16-year-olds have to pay tax? Rules for teenage staff

When considering how to pay employees who are under 18, startups are expected to understand and comply with employment law — including the tax implications.

Employees under 18 are liable for income tax and have the same Personal Allowance as an adult. The only exception is National Insurance, as young employees aren’t liable to pay it until they’re 16.

Hiring younger employees also comes with its own rules, such as protecting them from working too many hours.

In this article, we’ll break down everything you need to know about hiring young employees, including the laws around hiring, the current minimum wage levels, and how to employ a young worker legally.

How old do you have to be to work full or part-time in the UK?

The youngest age an employee can work in the UK is 13, except for children involved in acting, modelling or theatre work. There are restrictions on the type of work and hours a child aged 13 to 16 can work.

“Those aged 16-17 can work full or part-time, while those under 16 have limitations,” said Yiannis Zourmpanos, a chartered accountant and senior contributor at Bountii.

Once they reach school leaving age – defined as reaching 16 by the end of the summer holidays, with minor differences for Scotland, Wales and Northern Ireland – they can work up to 40 hours per week.

What are the minimum wage levels for under-18s?

Children under 16, or school-aged children, do not qualify for the National Minimum Wage. They also do not pay National Insurance (NI), and only need to be included on the payroll if they earn above the Personal Allowance of £12,570.

Employees, including apprentices, aged 16 to 17, must be paid at least £8 per hour from April 2026. If they earn more than £123 a week, employers should add them to their payroll, but only deduct NI if they earn £242 per week or more. Self-employed workers aged under 18 are not entitled to the minimum wage.

Aged 18, adult employment rights and rules apply, and minimum wage rates increase. Employees must be aged 21 or above to receive the National Living Wage.

Do 16-year-olds and under-18s have to pay tax?

Everyone, regardless of age, can earn up to the current annual Personal Allowance of £12,570 before they pay tax. This includes earnings from all sources.

Under 18s’ income usually comes from employment or self-employment, or interest from savings, trusts, dividends or even capital gains. Each of these sources of income can generate a tax liability.

While capital gains tax (CGT) liability may sound unlikely, there has actually been a rise in the number of young people in the UK investing in cryptocurrency. According to data reported by Yahoo! Finance, 50% of young people in the UK (as young as 18) are open to investing in crypto ETNs (Exchange Traded Notes). This means CGT can be triggered if investments go over the £3,000 threshold.

Savings income can be taxable, but it’s unlikely the amount would exceed tax thresholds and be liable for tax on its own, though it could form part of an individual’s total taxable income and mean they need to complete a tax return.

Workers aged 16 to 18 will pay tax and NI if their earned income is above the Personal Allowance threshold, or if they are self-employed and their taxable profits are above £12,570 a year.

Children aged under 16 can still be liable for tax from earned income above £12,570, but they do not pay NI.

How much tax can they pay?

16 to 18-year-olds can and do work full-time, particularly as part of family-run businesses or as tradespeople. However, in practice, under-18s will not usually earn enough to pay tax.

In reality, most in this age group will work part-time whilst studying for a professional qualification, and not earn enough to pay tax.

If they do earn over £12,570 per tax year, under-18s are liable to pay income tax at 20% on income above this figure. In the unlikely event that they earn more than £50,270 in a tax year, they would pay income tax at the higher rate of 40% on the amount earned above this threshold. Workers aged over 16 must also pay NI.

As we’ve said, under-18s and 16s can also be liable for tax on savings income. In addition to the Personal Allowance of £12,570, every basic rate taxpayer – including under 18s – also receives a personal savings allowance of up to £1,000 of tax-free savings interest.

Those who earn less than £17,570 per year also receive the starting rate for savings, which allows them to receive up to £5,000 of interest on their savings before tax is due on that interest.

For each £1 earned or received above the £12,570 Personal Allowance threshold, the savings starting rate falls by £1.

These additional tax-free allowances mean a child can receive income of up to £18,570 a year without paying tax, with £6,000 of this coming from savings interest and £12,570 coming from another source, such as employment.

Examples of the tax under 18s might pay

These examples illustrate how under 18s can be liable for tax, and how to maximise their tax-free allowances:

Do under-18s get any tax breaks?

Besides the Personal Allowance everyone gets, there are no tax breaks for under-18s that employers need to take into consideration.

As for tax breaks outside of employment, under-18s do receive the savings Personal Allowance and the savings starting rate if they earn less than £12,570.

Under 18s also don’t pay tax on interest earned from tax-free child savings accounts, such as Junior ISAs or child trust funds. Like adults, children also qualify for capital gains tax allowances. The current CGT allowance for individuals is £3,000 annually.

Although it’s unlikely anyone aged below 18 will own their own property, under-18s are also disregarded from council tax calculations.

What steps should a startup take when they employ someone under 18?

Startups must adhere to employment law when employing full-time or part-time under-18s.

“While employing under-18s can seem like an untapped opportunity for enterprising young startups, there are a number of unique challenges that many may not fully anticipate,” said Zourmpanos.

For under-18s, the key stipulation is that they must stay in education or training until they reach 18, unless they:

• Are in an apprenticeship, traineeship, or supported internship
• Work for 20 hours or more per week, combined with part-time education or training
• Volunteer for 20 hours or more per week, combined with part-time education or training

Workers aged between 16 and 18 cannot work for more than eight hours a day or 40 hours a week, and usually not before 6am or after 10pm. They must also receive a break of 30 minutes when working longer than 4.5 hours, and 12 hours’ rest in any 24-hour working period. Startups should consider using accounting software to ensure they follow the rules.

If you employ 16-year-olds, they can work full-time when they leave school, legally classed as the last Friday in June of the year they turn 16. However, as we’ve explained, under-18s must also be in education or training until they reach 18. If someone starts a full-time job at 16, they still need to complete at least 280 guided learning hours a year in education or training.

Child employment rules for staff aged under 16 or school leaving age are stricter than those for 16 to 18-year-olds. Children between 13 and 16 can only take on part-time work that’s classed as ‘light’, and does not risk health and safety or affect their education.

There are other restrictions on the type of work children can do, including in factories, on industrial sites, during school hours, and before 7 am or after 7 pm.

Conclusion

Businesses can benefit from employing under-18s. They provide flexible staffing options, particularly during school holidays, and can undertake certain roles and train to become valuable future team members.

“The young workers I’ve supported are best served knowing basics like their zero-tax thresholds, recordkeeping, and asking employers to explain policies up front,” said Zourmpanos.

There are strict rules for hiring workers under 18, particularly for school-age workers aged 13 to 16. Startups need to comply with the law on working hours, conditions and pay.

Employers don’t have to worry about tax and NI for most workers aged below 16, as they’re unlikely to work enough hours to earn more than £12,570. Of course, if they do work enough hours, there can be tax implications. Employees aged 16 to 18 can work full-time and are also liable to pay NI, unlike under-16s.

Under 18s need to understand how income from other sources can create tax liabilities if it takes them above their Personal Allowance, which can include extra savings income allowances.