Most UK employers never pay the Apprenticeship Levy. It applies at 0.5% of your pay bill, but a £15,000 annual allowance means nothing is due until your pay bill passes £3,000,000 a year.
If you do pay it, the more important question is not how much — it is whether you spend it before it expires.
Do you pay it?
Work out your annual pay bill: total earnings subject to Class 1 secondary National Insurance. That includes wages, bonuses, commission and holiday pay. It excludes benefits in kind and payments to genuine contractors.
The quick test: if your annual pay bill is under £3,000,000, you pay nothing. That is roughly 100 staff on an average UK salary, so the overwhelming majority of small and medium employers are out of scope.
Connected companies and charities share a single allowance between them — you cannot multiply it by splitting a group into separate payrolls. You decide at the start of the tax year how to divide it, and it cannot be changed mid-year.
How much you pay
0.5% of the pay bill, minus the £15,000 allowance, spread across the year at £1,250 of allowance a month.
| Annual pay bill | Levy at 0.5% | Less allowance | Payable |
|---|---|---|---|
| £2,000,000 | £10,000 | −£15,000 | Nil |
| £3,000,000 | £15,000 | −£15,000 | Nil |
| £4,000,000 | £20,000 | −£15,000 | £5,000 |
| £10,000,000 | £50,000 | −£15,000 | £35,000 |
It is reported and paid monthly through PAYE on an Employer Payment Summary, alongside your other liabilities. Payment is due by the 22nd of the following month if paying electronically.
If your pay bill is close to the threshold, you must estimate at the start of the year and adjust as you go. Cumulative allowance carries forward within the tax year, so a month that tips you over can be offset by earlier unused allowance.
Getting the money back: the digital account
The levy is not simply a tax. Payments appear in your apprenticeship service account, and the government adds a 10% top-up — so £35,000 paid becomes £38,500 to spend.
The funds can only be spent on apprenticeship training and assessment with an approved provider. They cannot be spent on wages, travel, equipment, or the running costs of your own training team.
Funds expire after 24 months
This is the part that costs employers real money. Funds entering your account expire 24 months later if unspent, on a first-in-first-out basis. Substantial sums are returned to the Treasury every year by employers who paid the levy and never used it.
If you pay the levy, put a recurring calendar reminder against your account balance. It is the single highest-return administrative task available to a levy-paying employer.
Transferring funds
You can transfer up to 50% of your annual funds to other employers — commonly within a supply chain or to smaller businesses in your sector. Transferred funds do not expire in your account once committed.
If you do not pay the levy
Smaller employers still get apprenticeship funding through co-investment: the government pays 95% of training costs and you pay 5%. For apprentices aged 16 to 21, or 22 to 24 in certain circumstances, employers with fewer than 50 staff can have the full cost covered.
There is also a National Insurance saving that is widely missed: apprentices under 25 on an approved scheme attract no employer National Insurance up to the Upper Secondary Threshold, using category letter H. See our National Insurance guide for the category letters.
Levy or National Insurance?
They are often confused because both are employer payroll costs collected through PAYE. They are not alike.
| Apprenticeship Levy | Employer National Insurance | |
|---|---|---|
| Rate | 0.5% of pay bill | 15% above £5,000 |
| Who pays | Employer only | Employer, with a separate employee charge |
| Threshold | £3,000,000 pay bill | No threshold for the employer charge |
| Allowance | £15,000 a year | Employment Allowance up to £10,500 |
| Can you get it back? | Yes — as training funds, plus a 10% top-up | No |
| On the payslip? | No | Employer part no, employee part yes |
Devolution
The levy is UK-wide, but the digital account funds apprenticeships in England only. Scotland, Wales and Northern Ireland receive a share through the block grant and run their own schemes. If you employ people across the UK, your account reflects the proportion of your pay bill attributable to English employees, based on their home postcodes.
Common mistakes
- Assuming you pay it — under a £3,000,000 pay bill, you do not
- Letting funds expire — 24 months, first in first out, and unspent money is simply gone
- Splitting a group to multiply the allowance — connected employers share one allowance
- Trying to spend it on wages — training and assessment only
- Missing category H — apprentices under 25 can carry no employer National Insurance at all
Check your position with the Apprenticeship Levy calculator, or see the full employer picture in our guide to what an employee really costs. For the 2026/2027 filing deadlines, see the HMRC PAYE Online guide.