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

Startups need to understand and comply with employment law when considering how to pay employees who are very young.

Employing someone younger than 18 means following rules designed to protect younger workers from working too many hours. The rules for employing people aged under 16 are even stricter.

Business owners need to be aware of the tax rules that apply to staff aged under 18, and comply with them as an employer and on behalf of their employees.

This article will cover whether under 18s and 16s pay tax and the tax liability of workers of these ages, as well as how old you have to be to work in the UK, minimum wage levels for under 18s, what other tax breaks are available to them, and what employers must do when they hire under 18-year-olds.

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 do not pay national insurance (NI), and only need to be included on the payroll if they earn above 2024-25’s personal allowance of £12,570.

Employees, including apprentices, aged 16 to 17 must be paid at least £6.40 per hour. If they earn more than £123 a week, employers should add them to their payroll and deduct NI. 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 annual personal allowance of £12,570 for the 2024-25 tax year 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.

A capital gains tax (CGT) liability is unlikely, as it’s unusual for a child to own an asset that triggers a CGT liability when sold.

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 tax payer – 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 in 2024-25.

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. For 2024-25, these are £3,000 or £1,500 for trusts.

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
• Or work for 20 hours or more per week, combined with part-time education or training
• Or 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 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 7am or after 7pm.

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.