Do 16 Year Olds Pay Tax
- MAZ
- Jul 28
- 14 min read
The Audio Summary of the Key Points of the Article:
Understanding Tax Obligations for 16-Year-Olds in the UK
Do 16-Year-Olds Pay Tax in the UK?
Right, let’s get straight to the point: do 16-year-olds pay tax in the UK? The answer is it depends. If a 16-year-old earns above the Personal Allowance of £12,570 in the 2025/26 tax year, they’ll pay Income Tax just like any adult. They may also owe National Insurance contributions if their weekly earnings exceed £96 with a single employer. But most 16-year-olds, especially those juggling part-time jobs or pocket money gigs, don’t hit these thresholds, so they often escape tax entirely. The catch? It’s not just about wages—other income like savings interest or freelance work can tip them over the edge.
For context, HMRC data shows that only about 70,000 16-year-olds in the UK paid Income Tax in the 2023/24 tax year, a tiny fraction of the roughly 1 million in that age group. Most teens work part-time, earning well below the tax-free allowance. But if they’re self-employed or have investment income, things get trickier, and that’s where many trip up.
What Is the Personal Allowance and How Does It Work for Teens?
Now, if you’re wondering how the tax system decides who pays what, it all starts with the Personal Allowance. For the 2025/26 tax year, this is set at £12,570, meaning you can earn this amount from all taxable sources—wages, self-employment, or even savings interest—before Income Tax kicks in. For a 16-year-old, this allowance is the same as for adults, no special treatment here. But there’s a twist: if their total income exceeds £100,000, the allowance shrinks by £1 for every £2 above that threshold, vanishing entirely at £125,140. Unlikely for a teen, but worth knowing if they’re a child prodigy with a side hustle!
Here’s a quick breakdown of how Income Tax works once you pass the Personal Allowance:
Income Band (2025/26) | Tax Rate | Applies To |
£0 - £12,570 | 0% | Personal Allowance (tax-free) |
£12,571 - £50,270 | 20% | Basic Rate |
£50,271 - £125,140 | 40% | Higher Rate |
Over £125,140 | 45% | Additional Rate |
So, picture this: 16-year-old Freya earns £10,000 from a part-time retail job. She pays no Income Tax because she’s under the £12,570 threshold. But if her mate Jasper pulls in £15,000 from streaming video game content, he’d owe 20% tax on the £2,430 above the allowance—roughly £486 in tax. Simple, but it’s easy to miss if you’re not keeping track.
When Do National Insurance Contributions Apply?
Here’s where things get a bit sticky: National Insurance (NI). If a 16-year-old earns more than £96 per week (£4,992 annually) from a single employer, they’ll pay Class 1 Primary NI at 8% on earnings between £242 and £967 per week, and 2% above that. Unlike Income Tax, NI kicks in at a lower threshold, so teens with regular part-time jobs often see deductions on their payslips.
For example, let’s say Idris works 20 hours a week at a café, earning £10 per hour—£200 weekly. That’s above the £96 threshold, so his employer deducts NI through PAYE (Pay As You Earn). His annual earnings of £10,400 keep him under the Personal Allowance, so no Income Tax, but he’d still pay around £150 in NI for the year. Employers also pay Class 1 Secondary NI (15% in 2025/26) on earnings above £175 per week, which doesn’t affect the teen’s take-home pay but matters for business owners.
What About Self-Employment for 16-Year-Olds?
Now consider this: if a 16-year-old is hustling as a freelancer—say, selling handmade jewellery or tutoring online—they’re considered self-employed. If their annual profit exceeds £1,000 (the Trading Allowance), they must register with HMRC for Self Assessment by 5 October 2025 for the 2024/25 tax year. They’ll file a tax return by 31 January 2026, declaring income and expenses. Anything above the Personal Allowance gets taxed at the rates above, and they’ll also pay Class 2 NI (£3.45 weekly if profits exceed £6,725) and Class 4 NI (6% on profits between £12,570 and £50,270).
Take Nia, a 16-year-old graphic designer earning £8,000 in profit. She’s under the Personal Allowance, so no Income Tax, but she’d owe Class 2 NI (about £179 annually) if her profits exceed £6,725. If she earns £14,000, she’d pay Income Tax on £1,430 (£286 at 20%) plus NI, which could catch her off guard if she’s not prepared.
Are There Special Rules for Teens?
Be careful! There’s a common myth that 16-year-olds don’t pay tax because they’re “too young.” Nope, HMRC doesn’t care about age—if you earn enough, you’re taxed. However, there are some teen-specific considerations. For instance, if a 16-year-old receives income from a parental gift (like dividends from shares gifted by parents), the £100 rule applies. If this income exceeds £100 annually, it’s taxed as the parent’s income, not the teen’s, to prevent tax avoidance. This doesn’t apply to gifts from grandparents or others, so if Granny invests £10,000 for young Elowen and it generates £600 in interest, that’s Elowen’s to keep tax-free (assuming it’s under her Personal Allowance).
Another quirk: 16-year-olds can’t open an adult ISA, but they can manage a Junior ISA opened by their parents, with a £9,000 annual limit in 2025/26. Income from Junior ISAs is tax-free, which is a handy way to save without worrying about tax.
Practical Tax Scenarios and Solutions for 16-Year-Olds in the UK
What Happens If a 16-Year-Old Is Overtaxed?
Now, it shouldn’t be a surprise for you, but many 16-year-olds get stung by overtaxing, especially when they start a new job. This often happens because of emergency tax codes, like 1257L W1 or M1, which HMRC applies when they don’t have full details about your income. These codes assume you’re earning the same amount monthly, which can lead to excessive tax deductions for teens working irregular hours. For example, if 16-year-old Aled earns £2,000 in one month from a summer job but nothing else all year, an emergency tax code might tax him as if he’s earning £24,000 annually, docking far too much.
To fix this, Aled should check his payslip and contact HMRC via www.gov.uk/check-income-tax-current-year to update his tax code. If he’s overpaid tax, he can claim a refund by completing form P50 (if he’s stopped working) or waiting until the tax year ends, when HMRC reconciles his earnings. In 2023/24, HMRC processed over 200,000 refunds for young workers, with an average refund of £300, so it’s worth checking.
If you’re a parent or employer, help the teen track their payslips and ensure their P45 or P60 reflects their actual earnings. This prevents surprises and ensures they’re not out of pocket.
How Does PAYE Work for Teenage Employees?
So, the question is: how does the Pay As You Earn (PAYE) system affect 16-year-olds? If they’re employed—say, stacking shelves or serving coffee—their employer deducts Income Tax and National Insurance directly from their wages based on their tax code, usually 1257L for the standard Personal Allowance (£12,570 in 2025/26). The employer reports this to HMRC in real-time, so there’s no need for the teen to file a tax return unless they have other income.
Let’s break it down with an example. Suppose 16-year-old Seren works 15 hours a week at £9 per hour, earning £135 weekly (£7,020 annually). Her employer uses PAYE to deduct Class 1 NI (8% on earnings above £96 weekly), which comes to about £3.12 per week or £162 annually. Since her income is below the Personal Allowance, no Income Tax is deducted. But if Seren has two jobs, each paying £100 weekly, she might face NI on both but only one Personal Allowance, so she’d need to contact HMRC to allocate it correctly.
Here’s a table to clarify PAYE deductions for a typical teen’s part-time job:
Weekly Earnings | NI Threshold | NI Deduction (8%) | Income Tax (if applicable) |
£80 | Below £96 | £0 | £0 (below £12,570 annually) |
£150 | Above £96 | £4.32 (£150 - £96) | £0 (below £12,570 annually) |
£300 | Above £96 | £16.32 (£204 cap) | £0 (below £12,570 annually) |
Can Savings or Investments Trigger Tax for Teens?
Now consider this: if a 16-year-old has savings or investments, could they owe tax? Yes, but only in specific cases. The Personal Savings Allowance lets basic-rate taxpayers (like most teens) earn up to £1,000 in savings interest tax-free in 2025/26. Interest from banks, building societies, or investments counts toward this. If 16-year-old Rhys has £20,000 in a savings account earning 3% interest (£600 annually), it’s tax-free because it’s under both the Personal Savings Allowance and his Personal Allowance.
However, if Rhys’s savings come from a parental gift and generate over £100 in interest, that interest is taxed as the parent’s income under HMRC’s parental settlement rules. For non-parental gifts, like from an aunt, the interest is Rhys’s and only taxed if his total income exceeds £12,570. Dividends from investments (e.g., shares) are trickier, with a Dividend Allowance of £500 in 2025/26. Anything above that is taxed at 8.75% for basic-rate taxpayers.
For example, if 16-year-old Lowri inherits £50,000 and invests it in a fund yielding £1,200 in dividends, she’d pay 8.75% tax on £700 (£1,200 - £500), or £61.25, assuming her other income is below the Personal Allowance. Teens with such income should track it carefully and register for Self Assessment if needed.
Step-by-Step Guide: Checking If a 16-Year-Old Owes Tax
Hey, don’t sweat it! If you’re unsure whether a 16-year-old needs to pay tax, follow this practical guide:
Tally All Income: Add up all earnings from jobs, self-employment, savings interest, or dividends for the tax year (6 April 2025 to 5 April 2026).
Check Personal Allowance: If total income is below £12,570, no Income Tax is due. If above, tax applies at 20% on the excess up to £50,270.
Review NI Thresholds: For employed teens, check if weekly earnings per job exceed £96. If yes, Class 1 NI (8%) applies on earnings above this.
Assess Self-Employment: If self-employed, register for Self Assessment if profits exceed £1,000. Pay Class 2 NI (£3.45 weekly) if profits are over £6,725.
Verify Savings/Investments: Ensure savings interest is under £1,000 and dividends under £500 to avoid tax. Check for parental gift rules (£100 limit).
Check Payslips: Look for emergency tax codes (e.g., 1257L W1). If overtaxed, contact HMRC or submit form P50 for a refund.
Keep Records: Save payslips, bank statements, and receipts for at least 22 months in case HMRC queries arise.
This guide helps teens, parents, or employers avoid tax pitfalls and claim refunds if needed.
What Should Employers Know When Hiring 16-Year-Olds?
None of us is a tax expert, but if you’re a business owner hiring a 16-year-old, you’ve got responsibilities. You must register them with HMRC, issue a P45 when they leave, and deduct PAYE and NI correctly. You’ll also pay employer’s NI (15% on earnings above £175 weekly in 2025/26), which adds to your costs. For instance, hiring 16-year-old Cai at £200 weekly means you pay £3.75 weekly (£200 - £175 × 15%) in employer’s NI, or £195 annually, on top of their wages.
Be proactive: ensure their tax code is correct to avoid overtaxing, which can frustrate young workers. In 2024, HMRC reported 15% of small businesses misapplied tax codes for young employees, leading to unnecessary refunds. Double-check their National Insurance number and communicate with HMRC if they have multiple jobs to split the Personal Allowance correctly.
Key Takeaways and Advanced Considerations for 16-Year-Olds and Tax in the UK
What Are the Risks of Not Declaring Income?
Be careful! If a 16-year-old earns taxable income—say, from freelancing or online content creation—and doesn’t declare it, they could face HMRC penalties. Failing to register for Self Assessment when profits exceed £1,000 can lead to a fine of up to £100, plus interest on unpaid tax. For example, if 16-year-old Dylan earns £10,000 from selling custom t-shirts but doesn’t register by 5 October 2025 for the 2024/25 tax year, HMRC could slap him with a penalty and demand any owed tax by 31 January 2026. In 2023/24, HMRC issued over 10,000 penalties to young self-employed individuals for late registration, averaging £150 each.
To avoid this, teens should keep detailed records of income and expenses. A simple spreadsheet tracking sales, costs, and dates can save headaches. Parents can help by setting up a Junior ISA to park earnings tax-free, up to the £9,000 annual limit in 2025/26, reducing taxable income.
How Can Teens Plan for Tax Efficiency?
Now, let’s talk strategy: how can a 16-year-old keep more of their hard-earned cash? If they’re self-employed, claiming allowable expenses—like materials, travel, or software—reduces taxable profit. For instance, 16-year-old Zara, a freelance photographer, earns £12,000 but spends £2,000 on camera gear and editing software. By deducting these, her taxable profit drops to £10,000, keeping her below the Personal Allowance (£12,570), so no Income Tax is due. She still pays Class 2 NI (£3.45 weekly, or £179 annually) if profits exceed £6,725, but proper expense tracking saves her £400 in tax.
Another tip: if a teen has multiple income sources (e.g., a part-time job and savings interest), they should ensure their Personal Allowance is allocated efficiently. They can contact HMRC via www.gov.uk/check-income-tax-current-year to split it across employers or offset it against self-employment income. This is crucial for teens like Owain, who earns £8,000 from a café job and £5,000 from tutoring. Without adjusting his tax code, he might overpay tax on the tutoring income.
Here’s a table of common allowable expenses for self-employed teens:
Expense Type | Examples | Notes |
Equipment | Camera, laptop, tools | Must be used for business purposes |
Travel | Bus fares, petrol for work trips | Excludes commuting to a fixed workplace |
Materials | Art supplies, tutoring resources | Must be directly related to income |
Professional Fees | Accounting software, website hosting | Reasonable costs only |
What About Rare Scenarios Like Inheritance or Gifts?
Now consider this: what if a 16-year-old receives income from unusual sources, like an inheritance or trust? If they inherit assets generating income—say, rental property or dividends—they’re taxed like adults. For example, 16-year-old Bronwen inherits a flat generating £10,000 in annual rent. This counts toward her Personal Allowance, leaving £2,570 tax-free. If she earns another £5,000 from a job, her total income (£15,000) exceeds the allowance, so she pays 20% tax on £2,430 (£486). She’d need to register for Self Assessment to declare the rental income.
Trusts are trickier. If a 16-year-old receives income from a trust set up by a grandparent, it’s taxed as their own, but parental trusts fall under the £100 rule, where income over £100 is taxed as the parent’s. In 2024/25, HMRC scrutinised 5,000 trust-related cases involving minors, so accurate reporting is key to avoid audits.
How Do Tax Refunds Work for Teens?
So, the question is: what if a 16-year-old overpays tax? This often happens with short-term jobs or incorrect tax codes. For instance, 16-year-old Ianto works a summer job earning £3,000 but gets taxed under an emergency code, losing £400. Since his annual income is below £12,570, he’s owed a refund. He can claim it by submitting form P50 if he’s stopped working or waiting for HMRC’s year-end reconciliation. In 2023/24, over 50,000 teens claimed refunds, averaging £250 each, often within 6 weeks of applying.
To speed things up, teens should use HMRC’s online portal at www.gov.uk/check-income-tax-current-year to check their tax status and submit claims. Parents can assist by ensuring all payslips and P60 forms are saved, as HMRC may request them.
Summary of the Most Important Points
16-year-olds pay Income Tax only if their total income exceeds the Personal Allowance (£12,570 in 2025/26).
National Insurance applies if weekly earnings from one employer exceed £96, at 8% on earnings above this threshold.
Self-employed teens must register for Self Assessment if profits exceed £1,000, filing by 31 January 2026 for 2024/25.
The Personal Savings Allowance (£1,000) and Dividend Allowance (£500) keep most savings and investment income tax-free for teens.
Income from parental gifts over £100 annually is taxed as the parent’s income, not the teen’s.
Junior ISAs allow tax-free savings up to £9,000 annually, ideal for managing earnings.
Emergency tax codes (e.g., 1257L W1) can overtax teens, but refunds are claimable via form P50 or HMRC’s portal.
Employers must deduct PAYE and NI correctly and pay employer’s NI (15% above £175 weekly) for 16-year-old workers.
Self-employed teens can reduce taxable income by claiming allowable expenses, like equipment or travel costs.
Income from inheritances or trusts is taxable if it exceeds the Personal Allowance, requiring Self Assessment registration.
FAQs
Q1: Do 16-year-olds need a National Insurance number to work in the UK?
A1: Yes, 16-year-olds need a National Insurance number to work legally in the UK, as it’s required for employers to process PAYE and National Insurance deductions. They typically receive one automatically from HMRC around their 16th birthday.
Q2: Can a 16-year-old claim tax relief on pension contributions?
A2: Yes, a 16-year-old can contribute to a pension and claim tax relief, typically at the basic rate of 20%, up to £3,600 annually in a personal pension scheme, even if they don’t pay tax.
Q3: Are 16-year-olds exempt from tax on income from gifts?
A3: Income from gifts, like interest or dividends, is tax-free up to the Personal Allowance (£12,570) unless it’s from parents and exceeds £100 annually, in which case it’s taxed as the parent’s income.
Q4: Do 16-year-olds pay tax on income from online platforms like YouTube or TikTok?
A4: Income from online platforms is treated as self-employment income, taxable if profits exceed £1,000 (Trading Allowance), requiring Self Assessment registration.
Q5: Can a 16-year-old’s tax code be split across multiple jobs?
A5: Yes, HMRC can split a 16-year-old’s Personal Allowance across multiple jobs if they contact HMRC to adjust their tax code, ensuring they don’t overpay tax.
Q6: What happens if a 16-year-old doesn’t register for Self Assessment when required?
A6: If a 16-year-old fails to register for Self Assessment when their self-employed profits exceed £1,000, they could face a £100 penalty plus interest on any unpaid tax.
Q7: Are 16-year-olds taxed on pocket money or allowances from parents?
A7: No, pocket money or allowances from parents are not taxable, as they’re considered gifts, not income, unless invested to generate taxable interest or dividends.
Q8: Can a 16-year-old claim a tax refund if they stop working mid-year?
A8: Yes, if a 16-year-old stops working and their annual income is below £12,570, they can claim a refund for overpaid tax using form P50 or HMRC’s online portal.
Q9: Do 16-year-olds pay tax on money earned from babysitting?
A9: Babysitting income is considered self-employment; if profits exceed £1,000 annually, they must register for Self Assessment and may owe tax and National Insurance.
Q10: Are 16-year-olds eligible for tax credits in the UK?
A10: Generally, 16-year-olds cannot claim tax credits like Working Tax Credit, as they’re typically not eligible due to age and income requirements, though exceptions apply for specific circumstances like disability.
Q11: Can a 16-year-old’s income affect their parents’ tax benefits?
A11: A 16-year-old’s income doesn’t directly affect parents’ tax benefits like Child Benefit, which stops at age 16 unless they’re in full-time education.
Q12: Do 16-year-olds pay tax on income from a part-time job while studying?
A12: If their total income from a part-time job exceeds £12,570, they pay Income Tax at 20% on the excess; National Insurance applies if weekly earnings exceed £96 per employer.
Q13: Can a 16-year-old deduct business expenses if they’re self-employed?
A13: Yes, self-employed 16-year-olds can deduct allowable business expenses, like materials or travel costs, from their profits to reduce taxable income.
Q14: Are 16-year-olds taxed on income from crowdfunding campaigns?
A14: Crowdfunding income is taxable if it’s for business purposes and exceeds the £1,000 Trading Allowance, requiring Self Assessment; personal gifts via crowdfunding are typically tax-free.
Q15: Do 16-year-olds pay Capital Gains Tax on selling assets?
A15: Yes, if a 16-year-old sells assets like shares and makes a gain above the £3,000 annual exempt amount, they pay Capital Gains Tax at 10% or 20%, depending on their income tax band.
Q16: Can a 16-year-old use a tax app to manage their taxes?
A16: Yes, 16-year-olds can use HMRC-approved apps to track income, expenses, and file Self Assessment returns if self-employed, simplifying tax management.
Q17: Are 16-year-olds taxed on income from competitions or prizes?
A17: Cash prizes or income from competitions are generally tax-free unless they’re tied to a business activity, in which case they count toward taxable income.
Q18: Do 16-year-olds need to pay tax on money earned abroad?
A18: If a 16-year-old is a UK resident, their worldwide income is taxable, but they can claim tax relief or credits under double taxation agreements, depending on the country.
Q19: Can a 16-year-old get a tax refund if they’re on an apprenticeship?
A19: Yes, if their apprenticeship income is below £12,570 and tax was deducted, they can claim a refund through HMRC, typically at the tax year’s end or via form P50.
Q20: Are 16-year-olds taxed on income from selling homemade goods online?
A20: Income from selling homemade goods online is taxable as self-employment if profits exceed £1,000 annually, requiring registration for Self Assessment and potential tax and NI payments.
About the Author
Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of MTA and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.
Disclaimer:
The information provided in our articles is for general informational purposes only and is not intended as professional advice. While we strive to keep the information up-to-date and correct, MTA makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained in the articles for any purpose. Any reliance you place on such information is therefore strictly at your own risk. The graphs may also not be 100% reliable.
We encourage all readers to consult with a qualified professional before making any decisions based on the information provided. The tax and accounting rules in the UK are subject to change and can vary depending on individual circumstances. Therefore, MTA cannot be held liable for any errors, omissions, or inaccuracies published. The firm is not responsible for any losses, injuries, or damages arising from the display or use of this information.
Comments