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Apprenticeships and Tax: What You Need to Know

By: J.A.J Aaronson - Updated: 15 Oct 2018 | comments*Discuss
 
Tax Income Hmrc Paye Apprentice

No one wants to worry about tax. It is a necessary irritation; something that we all have to do, whether we like it or not.

But despite the fact that it is very few people’s favourite thing to think about, it is important to understand how tax affects you. Apprentices will pay tax on the money they earn just like any other employee. If you are starting an apprenticeship you should ensure that you are familiar with the tax system in order to avoid paying the wrong amount.

There are many common misconceptions about the way in which apprenticeships are taxed. This article provides an overview of the main points you should understand – but if you are in doubt about your tax responsibilities you should make sure that you seek independent advice.

Are apprenticeships taxed?

Yes. There is a common misconception that apprentices do not have to pay tax. This is not the case. Apprentices are employees, and they are treated as such for tax purposes. This means that you will have to pay income tax and National Insurance Contributions (NICs) in the same way as everyone else.

You will normally be taxed through the Pay As You Earn (PAYE) system. Under PAYE tax is deducted ‘at source’ – meaning that it is taken straight from your pay packet. You will therefore not normally need to worry about completing a Self Assessment tax return.

You will be assigned a tax code. This combination of letters and numbers will tell HMRC and your employer how much should be deducted from your pay packet. It is important that your tax code is correct.

How much tax will I pay?

This will depend how much you earn. For the 2017-18 tax year, if you earn less than £11,500 you will not be taxed at all. This is known as your personal allowance. Earnings over the personal allowance will be taxed at a rate of 20 per cent.

If you earn more than £157 per week you will also have to pay National Insurance Contributions. If you earn between £113 and £157 a week, your contributions are treated as having been paid to protect your National Insurance record. As an employee you will pay Class 1 NICs. These are charged at 12 per cent of your income between £157 and £866 per week. Earnings over £866 will attract additional NICs at 2 per cent.

What about students?

Many people believe that apprentices are taxed differently because they are also studying. It is important to understand that apprentices are employees, and they are taxed as such.

It may also be useful to understand that students completing ‘conventional’ courses such as degrees or A Levels also have to pay tax just like everyone else. If they earn more than the income tax personal allowance, or the National Insurance Lower Earnings Limit, they will have to pay. Confusion arises because the majority of students work relatively few hours during term time, and therefore do not earn enough to exceed their personal allowance.

I think I’ve paid too much tax. What can I do?

It is, unfortunately, common for people to pay the wrong amount of tax – and it is a particularly frequent occurrence amongst those who have recently started work.

There are numerous potential reasons for incorrect tax payments. They tend to occur because HMRC does not have the information it needs to correctly calculate your tax payments. In these cases you may have been assigned a so-called ‘emergency tax code’ which could result in you paying too much tax. Alternatively, your tax code might simply be wrong. Your tax code can be found on your payslip. It is important that this code is correct, as it will determine the amount of tax deducted from your pay packet.

If you think you have paid too much tax, you should call HMRC on 0845 300 0627 and explain the situation. They may ask you to send in documents to support your claim.

It is also important to understand that underpayment of tax can also occur when tax codes are wrong. Indeed, millions of taxpayers have received letters in recent months telling them that they have paid too little tax, and demanding that they make extra payments. You should therefore keep track of your tax payments, and make sure that you are not underpaying in order to avoid a nasty surprise further down the line.

Tax affairs can be complicated, particularly if you are entering work for the first time. If you are in any doubt about your tax situation, contact HMRC or your local Citizens Advice Bureau for more information.

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[Add a Comment]
I have recently started an apprenticeship/full time. I also have a weekend / part time job. Does this mean I will pay tax at the higher rate on a second Income?
JM - 15-Oct-18 @ 9:47 PM
If I'm am doing apprenticeship and getting paid below £195 weekly do I have to pay housing benefits and council tax
T - 29-Sep-18 @ 1:07 PM
Myself and my husband are starting up a recruitment company working from home. Would we be able to take our two sons aged 19 & 18 on as apprentice recruiters ??
Jonesie - 21-Sep-18 @ 12:53 PM
@Sam and stephanie hands and Zara...The current minimum wage rate for an apprentice is £3.70 per hour which also applies to individuals aged 19 or over who are in their first year.
JulesT - 3-Sep-18 @ 3:29 PM
@Stephanie hands this is not how it is calculated. If you earn under 11,500 no tax will be deducted. But, as soon as you earn over this figure 20% tax is deducted for the total annual sum NOT the earning after the tax free money.
Sam - 30-Aug-18 @ 11:44 PM
Hi Zara, well done on starting an apprenticeship at 36!! minimum wage for a 36 year old is £7.83, If its a full time apprenticeship (say 40 hours) 7.83 x40 = £313.20per week 313.20 x 52 weeks per year = £16,286 £11,500 is tax free £5,286 would be taxable at 20%£5286-20%=4228.20 so your annual take home would be 15,228 APPROX You would also have to pay NI
stephanie hands - 23-Aug-18 @ 2:23 PM
Hi I'm now staring an apprentiship. I'm 36 and will be paid the national minimum wage for my age. How much tax and national insurance would I have to pay?
Zara - 22-Aug-18 @ 11:40 AM
Clare- Your Question:
My daughter gets paid straight in her bank account but never gets a safe slip so has no idea what she is paying is this right ?

Our Response:
Your daughter has a right to request a regular pay slip from her employer, please see link here.
AnApprenticeship - 10-May-18 @ 10:28 AM
My daughter gets paid straight in her bank account but never gets a safe slip so has no idea what she is paying is this right ?
Clare - 9-May-18 @ 1:34 PM
Con - Your Question:
I'm paid £120 wkly for my apprenticeship on 40hr. Am I under paid?

Our Response:
You would have to read the terms of your contract regarding what working hours you are paid for. The National Minimum wage for your age range is £3.70, for an apprentice please see link here . If your contracted hours are 40, then you may not be paid enough. If you are not paid the National Minimum Wage for your age, then you may be able to claim this amount back. You may wish to speak to Acas to check whether you are being paid the right amount if you are still unsure.
AnApprenticeship - 30-Apr-18 @ 11:05 AM
I'm paid £120 wkly for my apprenticeship on 40hr. Am I under paid?
Con - 29-Apr-18 @ 12:32 PM
@Lb - they might have got it from your P45 which has all the necessary information on it.
MaB - 20-Apr-18 @ 11:01 AM
If i have never given my employer my ni number can they be paying it ie can they obtain it elsewhere, my employer is telling me they are paying it but i have never been given proof. I earn 150 a week part time work amd i read somewhere anything below 167 you dont pay im just looking for clarification before i challenge employer
Lb - 13-Apr-18 @ 10:46 PM
Emmy - Your Question:
Hi if I'm doing Apprenticeship and earn £122 a month and £1,344 in a year will I be taxed?

Our Response:
You will not be taxed. You have to earn more than £11,850 per annum to be eligible to pay tax on your earnings.
AnApprenticeship - 12-Apr-18 @ 3:28 PM
Hi if I'm doing Apprenticeship and earn £122 a month and £1,344 in a year will i be taxed?
Emmy - 10-Apr-18 @ 4:36 PM
Can I do an apprenticeship course and have a UTR number? Or can I work for a construction firm and still have a UTR number?
sam18 - 22-Mar-18 @ 10:57 AM
Hi. I have been doing an apprenticep for the last 2 years in the plumbing industry my employer is a ltd company but does not have any employees apart from himself and me. My hours and wage vary from week to week and I have never had any pay slips . I’m about to start my 3rd year and the most I have ever earnedis £240 a week. Should I be registered and be paying any tax or National Insurance?? If so , who is responsible for sorting this out. Thank you
Reece - 21-Nov-17 @ 5:34 PM
Becca - Your Question:
Hi, I start my apprenticeship tomorrow. I might be doing 30 hours on minimum wage. I am not 100% sure but what taxes will I be paying and how do I do that?

Our Response:
The standard Personal Allowance is £11,500, which is the amount of income you don’t have to pay tax on. If you think you may earn over £11,500 per annum, then you will pay tax at 20% on any income above this figure.
AnApprenticeship - 6-Nov-17 @ 2:12 PM
Hi, I start my apprenticeship tomorrow. I might be doing 30 hours on minimum wage. I am not 100% sure but what taxes will I be paying and how do I do that?
Becca - 5-Nov-17 @ 8:11 PM
laura - Your Question:
Hello, I'm doing apprenticeships since the end of February. From the first My salary I'm asking my employer to give me payslip. And she is always ignoring that. I'm getting my wages by cash, so I don't know or she is paying my NI or not. Anyway I need P45 and payslip, to send it for Lithuanian taxes. Other thing is, that the company where I'm working doesn't exist. When I had a look on GOV.UK it shows that I'm working in Lithuania shop, not in the hair salon. What should I do?

Our Response:
You may wish to ask your employer directly if he is paying tax and NI on your behalf, if he does not give a satisfactory reponse you would have to ring HMRC to enquire.
AnApprenticeship - 7-Sep-17 @ 10:53 AM
Hello, I'm doing apprenticeships since the end of February. From the first My salary I'm asking my employer to give me payslip. And she is always ignoring that. I'm getting my wages by cash, so I don't know or she is paying my NI or not. Anyway I need P45 and payslip, to send it for Lithuanian taxes. Other thing is, that the company where I'm working doesn't exist. When I had a look on GOV.UK it shows that I'm working in Lithuania shop, not in the hair salon. What should I do?
laura - 6-Sep-17 @ 12:22 PM
Florence- Your Question:
I've just separated from my partner and was due to start a part time apprenticeship (16 hours a week)at the nursery my son will also be attending. I will be paying for his childcare there too.Would I be entitled to WTC? I will only be earning about £150 a month after childcare costs.I'm really panicking now. Many thanks

Our Response:
HMRC say that the hours you work as an apprentice will count as remunerative work for WTC purposes if: you have a contract of employment for your apprenticeship, you are attending a scheme (apprenticeship) where your payment is classed as earnings (as opposed to reimbursement of expenses) and subject to income tax and National Insurance contributions, please see link here . This should help you answer your question.
AnApprenticeship - 3-Aug-17 @ 10:25 AM
I've just separated from my partner and was due to start a part time apprenticeship(16 hours a week)at the nursery my son will also be attending. I will be paying for his childcare there too. Would I be entitled to WTC? I will only be earning about £150 a month after childcare costs. I'm really panickingnow. Many thanks
Florence - 1-Aug-17 @ 5:43 PM
Mazz - Your Question:
Hi if I'm earning £18,000 from an apprenticeship will I be taxed on the £18,000 or will I only be taxed on my earnings after £11,500, which is known as my personal allowance?

Our Response:
You will only be taxed on the amount over and above £11,500.
AnApprenticeship - 17-Jul-17 @ 12:15 PM
Hi if I'm earning £18,000 from an apprenticeship will I be taxed on the £18,000 or will I only be taxed on my earnings after £11,500, which is known as my personal allowance?
Mazz - 15-Jul-17 @ 3:34 PM
hello, I've just started an apprenticeship. i work 37.5 hours a week and earn £693.30 a month then national insurance takes off £2.40. if i got another job at the weekend will i be affected tax wise? if so how much will i be able to earn a week without being affect? sorry, i just really cant work this out
chloooe - 14-Feb-17 @ 3:16 PM
I'm about to start an apprenticeship but I'm also keeping my current job at the same time. Will I get taxed 20% as it'll be classed as a second job?
Lucy - 25-Oct-16 @ 1:58 PM
I have employed an apprentice on a college apprenticeship since April 2015. They were born in August 1997 (17 when they started). I have been paying the Nat Min Apprentice Wage of £3.30 per hour for a 37 hour week. (£120 per week). They walked out after 9 months of a 12 month apprenticeship and are now taking me to a tribunal for not paying PAYE (taxing there income or paying NI). I have tried to explain that they do not earn enough to have tax or NI deducted but they are still taking me to a tribunal. How do I stand. I also thought they had to work for 2 years before they could bring a tribunal case?
JohnE - 24-Oct-16 @ 4:59 PM
Dan - Your Question:
I've been on an apprenticeship since I was 16 doing a plumbing and heating course, I've always been paid cash in hand and had no wage slips. Now I need to look and becoming self employed as I have finished my last course and will be earning more. My employer has never asked for my national insurance number or any other details and I don't know what to do?

Our Response:
If you are an apprentice then you should be down on the company payroll regardless of whether you earn enough to pay tax or NI. It's legal requirement that your wages are paid PAYE. While by law your employer does not have to give you a wage slip, you can certainly ask for one, and your employer is legally obliged to comply.
AnApprenticeship - 18-Oct-16 @ 12:50 PM
I've been on an apprenticeship since I was 16 doing a plumbing and heating course, I've always been paid cash in hand and had no wage slips. Now I need to look and becoming self employed as I have finished my last course and will be earning more. My employer has never asked for my national insurance number or any other details and I don't know what to do?
Dan - 17-Oct-16 @ 8:17 PM
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