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Tax free earnings for teenagers

The tax free earnings for teenagers has been capped at £1000. Therefore young people need to be aware they may have to declare income and pay NI contributions on summer jobs.

Tax and advisory firm Blick Rothenberg is warning teenagers to make sure they stay within the tax-free limit to avoid incurring an unwanted tax bill.

Stefanie Tremain, a director at Blick Rothenberg said: ‘Traditionally teenagers wishing to earn money after finishing their exams have looked to retail or hospitality. However, with both industries taking a hit over the last year and a half, part time jobs can be thin on the ground.

‘More and more young people are looking at the opportunities to earn money created by lockdown. This could include pet sitting or walking for those owners who are now going back to work and having to leave their pets alone all day, gardening work for those who have grown to appreciate their outside space even more or offering tutoring to younger children who may have suffered during home learning.’

There are tax implications for part-time jobs, warned Tremain. ‘Young people are using their initiative and coming up with ideas for part time work, but by doing odd jobs they will in fact be self-employed for tax purposes,’ she said.

‘The good news is they can earn up to £1,000 per tax year without having to worry about the tax man, but if they are lucky enough to earn more than £1,000 in a tax year, they will need to tell HMRC.

‘It is also worth remembering that the number of “qualifying years” you have for National Insurance purposes determines the level of state pension received. In order to have a “qualifying year” anyone 16 and over would need to pay Class 2 National Insurance if they are self-employed or be employed and earn at least £120 a week.

‘The number of teenagers thinking about their state pension are probably few and far between, but in the future, they may be pleased they actioned this.’

Speak to AJR & Co Ltd if you are unsure