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Understanding the Apprenticeship Levy

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The Apprenticeship Levy is a UK government initiative designed to fund apprenticeship training and boost workforce skills across the country.

Who Pays the Levy?

Employers must pay the Apprenticeship Levy if their annual pay bill exceeds £3 million. The levy is charged at 0.5% of the total pay bill, and each employer receives an annual allowance of £15,000 to offset against their levy payment.

How It Works

  • The levy is collected monthly through the PAYE system.
  • Funds are held in a digital account and can be used to pay for apprenticeship training and assessment.
  • If the funds are not used within 24 months, they expire.

Using the Levy

Employers can use their levy funds to cover the costs of apprenticeship training and assessment for new and existing staff. These funds can be accessed via the Apprenticeship Service, where employers can:

  • Search for approved apprenticeship training providers
  • Select from a list of approved apprenticeship standards
  • Manage funding and view their apprenticeship account balance
  • Add apprentices and link them to chosen standards and providers
  • While the levy cannot be used to directly fund salaries or recruitment costs, investing in apprenticeships can support talent development and workforce planning.

Non-Levy Paying Employers

Smaller employers (with a pay bill under £3 million) do not pay the levy but can still access government funding for apprenticeships. Typically, they contribute 5% of the training costs, with the government covering the remaining 95%.

Recent Developments

The government has announced reforms to expand the system into a Growth and Skills Levy, aiming to support shorter and more flexible training routes. Further details are expected from the Department for Education in due course.

Do I have to pay the Apprenticeship Levy?

You must pay the levy if your annual pay bill exceeds £3 million. It’s charged at 0.5% of your total pay bill, with a £15,000 annual allowance to offset the cost.

How do I access my levy funds?

You can manage your funds through the Apprenticeship Service. This online portal allows you to view your balance, approve training costs, and manage apprenticeships.

What can levy funds be used for?

Levy funds can only be used to pay for apprenticeship training and assessment with approved providers and standards. They cannot be used for wages, recruitment, or travel costs.

Can I use the levy to train existing staff?

Yes. Apprenticeships are available for employees of all ages and experience levels, including existing staff looking to upskill or retrain.

What happens if I don’t use my levy funds?

Funds expire 24 months after they enter your account. Unused funds are returned to HM Treasury.

Can I transfer my levy funds to another employer?

Yes. You can transfer up to 25% of your annual levy funds to other employers, such as those in your supply chain or sector.

What if I don’t pay the levy?

Non-levy paying employers can still access government funding. Typically, you’ll pay 5% of the training cost, with the government covering the remaining 95%.

What happens if I run out of funds in my levy account?

If your digital account balance isn’t enough to cover the full cost of apprenticeship training, you’ll move to a co-investment model. This means you’ll pay 5% of the remaining training costs directly to the training provider, and the government will fund the remaining 95%—just like non-levy paying employers. This ensures you can continue supporting apprenticeships even after your levy funds are used up.

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