How are apprentices taxed?
As an apprentice, whether traditional or modern, you train to do your job with a mixture of working and some combination of on-the-job training and more formal learning. The end result will be a formal recognition of your ability. You are employed under a special contract for apprentices that is mainly a contract for training, but you are treated for tax purposes in the same way as any other employee.
You pay your tax under the Pay as You Earn (PAYE) system. Your employer takes your tax from your wages before you are paid – and then pays that tax over to HM Revenue & Customs (HMRC) for you. You can read more about how much tax you may have to pay in our employment tax guide on the LITRG website.
Your hourly rate of pay is determined in part by your contract and in part by regulations relating to the National Minimum Wage.
What about National Insurance? Are there some special rules?
For the 2020/21 tax year, if you earn more than £183 per week you will also have to pay National Insurance contributions (NIC). As an employee you will pay Class 1 NIC. These are charged at 12% of your income between £183 and £962 per week. Earnings over £962 will attract additional NIC at 2%.
With regards to special rules about National Insurance for apprentices, you may have heard that the government cut NIC for apprentices under 25, from April 2016. This is true, however this will only apply to EMPLOYER NIC for apprentices aged under 25 and up to earnings of a certain level. This will make it cheaper for employers to take on an apprentice – hopefully meaning they will take on more. You can read more about it in this Government notice.
In other pages on this website and our LITRG website we cover:
- How is my tax collected?
- Factsheet on What should I see on my payslip?
- What is the National Minimum Wage for apprentices?
- Introduction to tax credits and state benefits
- Factsheet for Apprentices which contains further information on the National Minimum Wage, how you are taxed, National Insurance contributions and tax credits
- Factsheet on Pension Automatic Enrolment
You can read more about apprentices on our main LITRG website, in the disabled people and carers guidance. The information is located here due to the numbers of disabled people in apprenticeships, but the information is applicable more widely.