The Apprenticeship Levy is a charge on larger UK employers that helps fund apprenticeships, reported through the Employer Payment Summary (EPS) alongside your other payroll submissions. This article explains who pays it, how it is calculated for 2026 to 2027, and how the levy funds are used. A companion article covers the Employment Allowance and Small Employers' Relief.
What is the Apprenticeship Levy?
The Apprenticeship Levy is a charge set at 0.5% of an employer's pay bill. It was introduced from 6 April 2017 and applies across the UK. There is an annual levy allowance of £15,000 to offset against the charge, which means that in practice, subject to the connected-company rules, only employers with annual pay bills greater than £3 million actually pay any levy. The levy is reported through the Employer Payment Summary alongside your other real-time submissions.
Who has to pay the Apprenticeship Levy?
Subject to the connected-company and charity rules, only employers with an annual pay bill greater than £3 million pay the levy. Because the levy is 0.5% of the pay bill and the £15,000 annual allowance offsets exactly 0.5% of £3 million, an employer with a pay bill of £3 million or less ends up with no levy to pay once the allowance is applied. All UK employers with a Class 1 National Insurance liability are technically within scope, but the allowance removes any liability for the great majority of smaller employers. If you are part of a connected group, you consider the combined position of the group rather than each company in isolation.
How is the pay bill calculated?
Your pay bill is all of the employee earnings liable to Class 1 secondary National Insurance, including earnings below the secondary threshold. This covers items such as wages, bonuses, commissions and some pension contributions on which National Insurance is due. It also includes the earnings of employees under 21 and apprentices under 25, even though the employer National Insurance rate on those earnings can be 0%, because the underlying earnings are still liable to secondary Class 1 National Insurance. The pay bill excludes earnings on which you are not liable to employer Class 1 National Insurance, such as the earnings of employees under 16, earnings outside UK National Insurance legislation, benefits in kind liable to Class 1A National Insurance, and payments to employees working abroad who make employee-only contributions.
How much is the levy allowance and how does it work?
The annual levy allowance is £15,000. You offset it against your levy liability on a cumulative, pro-rata basis, with one twelfth of the allowance (£1,250) becoming available each tax month. So by month one you have £1,250 of allowance, by month two £2,500, and so on up to £15,000 by month twelve. Because the allowance is cumulative, an employer whose pay bill rises during the year may have carried-over allowance that delays or reduces when they start paying, and in some cases means no levy is due even though the monthly pay bill increased. The levy you actually pay in a tax month is the cumulative levy liability to date, less the allowance to date, less anything already paid in earlier months.
How do I work out the levy due each month?
You add together all the earnings subject to employer Class 1 National Insurance from each payday in the tax month to get the monthly pay bill, then apply the 0.5% rate to the cumulative pay bill to date to find the cumulative levy liability. You subtract the cumulative allowance to date (a twelfth of £15,000 for each month so far) to find the levy payable to date, and subtract any levy already paid in earlier months to find the amount due for the current month. For example, an employer with a steady pay bill of £300,000 a month reaches £1,500 of levy in month one against £1,250 of allowance, paying £250, and continues paying £250 each month for a total of £3,000 across the year. An employer whose total pay bill for the year is £3 million or less pays nothing, because the cumulative allowance always matches or exceeds the cumulative levy.
How is the levy reported to HMRC?
The levy is reported through the Employer Payment Summary as part of your normal payroll process, carrying the levy due year to date, the tax month, and the annual allowance allocated to that scheme. You only need to report the levy if you are likely to have a liability, which generally means your previous year's Class 1 secondary pay bill was over £2.8 million, or you expect this year's pay bill to be over £3 million, or your share of the allowance within a connected group means you expect to pay. Once you start submitting levy figures you must keep submitting them for the rest of the year, even if the levy due to date is zero in later months.
How is the allowance shared between connected companies or multiple PAYE schemes?
Connected companies and charities can share the single £15,000 allowance between them, with each employer claiming its agreed portion against its own levy liability, but no more than £15,000 in total across the whole group. An employer running more than one PAYE scheme can likewise split the allowance across those schemes, again without exceeding £15,000 in total. The split must be agreed at the start of the tax year and then fixed for that year; an employer in a connected group cannot change the amount of allowance allocated part-way through. So group structures and PAYE arrangements should be reviewed before the tax year starts so each scheme reports the correct annual allowance on its EPS.
When is the levy due for payment?
The levy is paid alongside your other PAYE liabilities, with the due date falling 14 or 17 days after the end of each tax period depending on your payment method. The amount due for a period is your levy liability for that tax month, less any levy already paid to HMRC in earlier periods, which is the cumulative approach described above. You do not make a separate annual levy return; instead each EPS carries the year-to-date position, and the EPS for a month is generally expected by the 19th of the following month.
How do I access the levy funds for training?
Levy funds are accessed through the digital apprenticeship service, which English employers use to arrange and pay for apprenticeship training and assessment. The location of your employees within the UK does not change how much levy you pay, but it does affect the maximum amount you can spend through your apprenticeship service account, which reflects the proportion of your workforce in England. Once funds are in your account you draw them down to pay approved training providers, and the government's arrangements for unused funds and additional support sit alongside the core levy mechanism. The apprenticeship funding rules are administered separately from the payroll reporting of the levy.
How do the Apprenticeship Levy and the National Insurance reliefs interact?
The Employment Allowance, Small Employers' Relief and the Apprenticeship Levy are independent of one another but all handled through the same Employer Payment Summary. The Employment Allowance reduces your employer secondary Class 1 National Insurance, Small Employers' Relief lets a qualifying small employer recover statutory parental and bereavement payments at 109% rather than 92%, and the Apprenticeship Levy adds a charge for employers with very large pay bills. A small employer is unlikely ever to pay the levy, since a £3 million pay bill is far above the £45,000 Class 1 threshold for the relief, so in practice most businesses deal with the allowance and the relief while only the largest deal with the levy. Keeping your prior-year figures and group structure accurate is what ensures each adjustment is reported correctly on the EPS. Always check current HMRC guidance before the start of a tax year, as values and rules can change.