⚠️ We are currently updating our 2020/21 tax guidance across the website
The traditional view of an apprentice might be a young person learning alongside an experienced tradesman, for example a plumber in the construction industry. However, nowadays, apprenticeships can offer a gateway into a variety of careers.
Here we look at apprenticeships in more detail.
You can also find a section dedicated to apprenticeships on our specialist Tax Guide for Students website.
What is an apprenticeship?
Apprenticeships are government funded work-based training programmes for people aged 16 and over. They combine on the job training with nationally recognised qualifications. They are about equipping individuals with the new skills and learning they need for their job roles and for future employment and progression.
Apprenticeships come in different levels from intermediate and advanced to degree level and will last a minimum of 12 months, but depending on the qualification they may take longer.
There are lots of different subjects available to choose from sector specific apprenticeships like Dental or Childcare to ones in Customer Service and Business Administration.
Apprenticeships are a popular choice for young people but are actually open to all ages.
With regard to apprenticeships in England, there is some more information about eligibility, how long they take, the qualifications you can get and the different levels of apprenticeship on GOV.UK.
You can also find out more about English apprenticeships in the Apprentice Hub, including about the different types of apprenticeship.
Apprenticeships policy is a devolved matter and it is for the devolved administrations of Northern Ireland, Scotland and Wales to determine how they manage their own schemes. Find out about apprenticeships in Scotland, Wales and Northern Ireland.
How much are apprentices paid?
Apprentices must be paid at least the apprentice national minimum wage for all the time they are on their apprenticeships.
Apprentices who are under 19, or who are 19 or over and in the first year of their apprenticeship, will be paid a minimum of £4.15 per hour (from 1 April 2020), however many businesses pay more. Individuals not falling into these categories should be paid the minimum wage rate for their age band. Guidance about the appropriate hourly rates is available on GOV.UK.
⚠️ Note: the rules say that any new rate (that is, for those turning 19 and/or for those moving into the second year of their apprenticeship) starts from the beginning of the next pay period. People naturally think that if they are monthly paid and turn 19 (say) on the 15th of the month then they should be paid the higher rate for the rest of the month. But actually, they are only entitled to it from the 1st of the month following their birthday. See the example Rosie and example Seamus below.
The appropriate minimum wage rate should be paid for time working plus the time spent training both on and off the job. This includes time spent at college/or off site with a provider.
If you are not paid on an hourly basis, for example you are paid an annual salary, then GOV.UK contains information about how to work out if minimum wage is being paid.
For detailed information on how the minimum wage should be calculated, including how the accommodation offset works and how things like travelling time, tips and uniform deductions should be dealt with, please see our page What is the national minumum wage?
Sadly some businesses do not fully understand how minimum wage rates work so some apprentices are not always paid what they are legally due. You should speak to your boss or call the ACAS Pay and Work Rights Helpline if you think you are not being paid correctly.
Please note that the government amends the minimum wage rates on 1 April each year.
What about apprentice terms and conditions?
Most apprentices are employed and therefore have the same rights as other employees, including the right to be enrolled into a workplace pension if they meet the conditions (auto-enrolment). To find out more about your rights as an employee go to GOV.UK.
Some things to note though are:
- The minimum hours of employment for an apprentice should be at least 30 hours per week. By exception, where the individual’s circumstances or the particular nature of employment in a given sector makes this impossible, then an absolute minimum of 16 hours must be met. In such cases the duration of the apprenticeship should be extended.
- Apprentices are also entitled to holidays which you can find out more about on GOV.UK.
- Many of the special protections in the Working Time regulations for young workers under 18 will apply to apprentices, for example young workers must not exceed the eight hours a day or 40 hours per week. They are also entitled to rest breaks of at least 30 minutes if their shift lasts more than four and half hours.
You can contact the ACAS Pay and Work Rights Helpline for free and confidential advice on your rights at work.
What are the tax implications?
There is a common misconception that apprentices do not have to pay tax. This is not the case. Apprentices have to pay income tax in the same way as everyone else. Some general tax guidance for first time workers, which apprentices may find useful, can be found in our employment section.
For the 2020/21 tax year, if you earn less than £12,500 you should not ultimately be taxed at all, but you may pay National Insurance contributions (see below). The £12,500 figure is known as your personal allowance. Earnings over the personal allowance will be taxed at the appropriate income tax rate.
You will normally pay tax through the Pay As You Earn (PAYE) system – 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 can find out more about tax rates and allowances, how the PAYE system for employees works, how tax is paid and how to claim back tax if you think you have paid too much, in the tax basics section.
Are there special rules for National Insurance?
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 per cent of your income between £183 and £962 per week. Earnings over £962 per week will attract additional NIC at 2 per cent.
If you have earnings above the lower earnings limit (£120 per week or £520 per month for 2020/21/20) and below the primary threshold (£183 per week or £792 per month for 2020/21) you will not have to pay any Class 1 NIC. Your NIC record will be credited, however, as though you have paid Class 1 NIC. These are called NIC credits. These may earn you entitlement to contributory benefits and the state pension.
You can find out more about this in the NIC guidance in our employment section.
With regards to special rules about National Insurance for apprentices, you may have heard that the government cut NIC for apprentices aged under 25, since 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.
Can apprentices claim tax credits or universal credit?
There are two types of tax credit – working tax credit (WTC) and child tax credit (CTC).
The tax credits system is gradually being replaced by universal credit (UC). UC should have finished rolling out for new claims by January 2019. Existing tax credit claimants will be transferred across to UC sometime between July 2019 and March 2023 unless they have a change of circumstances that means they need to claim UC earlier or they choose to claim UC.
Apprenticeships and tax credits can be a tricky subject. As a general overview, if you are single and have no children, then to be entitled to WTC, you will need to be:
- at least 25 years old and in ‘remunerative’ work for at least 30 hours per week; or
- at least 16 years old and working at least 16 hours per week, if you have a physical or mental disability which puts you at a disadvantage in getting a job; or
- at least 60 years old and working for not less than 16 hours per week.
The hours requirements are different if you have children or a part of a couple. For a full list of the requirements go to Do I qualify for working tax credits (WTC)?.
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 and subject to income tax and NIC.
We advise that you contact the Tax Credits helpline and explain your situation.
You can find more on Tax Credits and Apprenticeships in the tax credits and benefits section.
In terms of universal credit and apprenticeships, you can claim universal credit while you are on a ‘recognised’ apprenticeship. DWP’s guidance says that this means you must:
- have a named training provider
- be working towards a recognised qualification
- be paid at least the NMW for an apprentice
You must also be able to provide:
- the name of your training provider
- the name of the vocational qualification you are studying for.
There are no upper or lower limits to the number of hours that you must work to qualify for universal credit as an apprentice but you may be expected to carry out ‘work related activity’ as part of your Claimant Commitment if your earnings are not above a certain level, known as your Conditionality Earnings Threshold (CET). If you are an apprentice this will be no more than 30 hours a week multiplied by the applicable minimum wage rate. If you are disabled, then this could be less or you may not be subject to CET at all. This can be discussed with your work coach and will be agreed as part of your universal credit Claimant Commitment.
Rosie was born in November 1998 and began her two year apprenticeship on 1 September 2019. Rosie is paid per calendar month and her NMW will be as follows:
- 1 September 2019 - 31 March 2020: Rosie’s NMW will be £3.90 per hour.
- 1 April 2020 - 31 August 2020: Rosie’s NMW will be £4.15 per hour as the NMW rates changed on 1 April 2020.
- 1 September 2020 - 31 March 2021: Rosie’s NMW will be £8.20 per hour as she has completed the first year of her apprenticeship. As she is aged over 19 she will be paid the NMW according to her age (on 1 September 2020, Rosie will be 21 years old).
Seamus started his three-year apprenticeship on 6 September 2017; he turned 17 on 8 May 2018. Seamus gets paid at the end of each calendar month and his NMW is as follows:
- 6 September 2017 - 31 March 2018: Seamus’s NMW rate was £3.50 per hour.
- 1 April 2018 - 31 March 2019: the NMW rate changed from 1 April 2018. Seamus’s NMW rate increased to £3.70 per hour. Even though Seamus completed his first year of his apprenticeship on 5 September 2018, he remained on the apprentice NMW rate as he was under 19 years old.
- 1 April 2019 - 31 March 2020: the NMW rate increased from 1 April 2019. Seamus’s NMW rate was £3.90 per hour.
- 1 April 2020 - 15 May 2020: the NMW increased to £4.15 per hour.
- 16 May 2020: Seamus’s NMW rate will change as he is now 19 and he has been on his apprenticeship for longer than one year. His new NMW rate is £6.45 per hour. The change will take effect from the beginning of the pay period after Seamus’s birthday and not from the actual date of his birthday.