Are under-16s required to pay tax?
I’m under 16 and have started my own online business venture. I’ve tried to register as self-employed but you need a NI number to do that. I’m a bit unsure of my tax liabilities and don’t want to get caught out. Do I even have to pay any tax or national insurance on my profits, or can I keep 100% of my earnings until I’m 16?
An HMRC representative writes:
Everyone who is self-employed must register with HMRC. Registration covers both income tax and national insurance. In order to register you will need to contact the helpline for the newly self employed on 08459 15 45 15.
As far as national insurance contributions are concerned, there are different types you need to know about. Class 2 national insurance is paid towards benefits and Class 4 national insurance is paid when profits reach a certain level. Because you are under 16, Class 2 contributions are not due. You can also apply to be exempt from paying Class 4 if you are under 16 at the start of the tax year (April).You only need to apply once and your application will cover all tax years up to and including the year of your 16th birthday. (Form CA2835U needs to be completed which you can get from HM Revenue and Customs).*
Once registered as self-employed, income tax will be due under the self assessment process. You need to fill in a tax return each year and give details of your income and expenses which you can do online. Whatever your age, your profits will then be taxed after your personal tax allowances have been taken into account. For the 09/10 tax year, the personal tax allowance or tax free amount is £6,475. Profits above this amount will be taxed. The standard rate of tax currently is 20%.
*Write to HMRC at the address below or visit www.hmrc.gov.uk
HM Revenue and Customs
National Insurance Contributions Office Deferment Services
Benton Park View
Newcastle upon Tyne