About the apprenticeship levy

The apprenticeship levy is a levy on UK employers, designed to fund growth in the government’s apprenticeship programme. The apprenticeship levy came into effect on 6 April 2017.

Employers have an allowance of £15,000 to offset against their levy liability. The levy allowance is not a cash payment. The terms of the allowance mean that only UK employers with an annual wage bill of more than £3 million are liable to pay the levy.

The levy is at a rate of 0.5% of an employer’s total pay bill, where there is employer National Insurance (NI) liability and where total wages stand at more than £3 million for the full year. For example, an employer with an annual wage bill value of £3,000,200.00 will pay (£3,000,200*0.5%) - £15000 = £1. An annual wage bill of anything less than £3,000,200.00 will result in a levy of £0 at month twelve because of rounding rules.

The calculation is on a monthly cumulative basis (like a tax calculation), so employers receive an apprenticeship allowance of £1,250 per month. If the value in the first month does not exceed £1,250, nothing is due. If the cumulative value at month two still does not exceed £2,500, nothing is due again and so on.

Levied employer	Non-levied employer
Employer of 250 employees, each with a gross salary of £20,000 Pay bill: 250 x £20,000 = £5,000,000 Levy sum: 0.5% x £5,000,000 = £25,000 Allowance: £25,000 -£15,000 = £10,000 annual levy payment	Employer of 100 employees, each with a gross salary of £20,000 Pay bill: 100 x £20,000 = £2,000,000 Levy sum: 0.5% x £2,000,000 = £10,000 Allowance: £10,000 -£15,000 = £0 annual levy payment

Single employers with multiple PAYE schemes have only one allowance. Connected employers may share one allowance between employers.

You can find more information about the apprenticeship levy at https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work