What is the apprenticeship levy?
Answered 11 March 2026
Here is a comprehensive explanation of the Apprenticeship Levy based on the available sources:
What the law says
The apprenticeship levy is a tax established under Part 6 of the Finance Act 2016. It is charged if a person has a pay bill for a tax year and the relevant percentage of that pay bill exceeds their levy allowance.
The key statutory mechanics are:
- Rate: The "relevant percentage" is 0.5% of the pay bill.
- Levy allowance: Each person with a pay bill is entitled to a levy allowance of £15,000 per tax year (subject to connected company/charity rules).
- Amount charged: The charge equals (0.5% × pay bill) minus the levy allowance (£15,000).
- Collection: HMRC's Commissioners are responsible for the collection and management of the levy.
- Anti-avoidance: The levy is subject to the general anti-abuse rule, disclosure of tax avoidance schemes, follower notices, accelerated payments, and promoters of tax avoidance schemes regimes.
HMRC guidance / practice
What is the pay bill? The pay bill is defined as all earnings liable to Class 1 secondary NICs, including wages, bonuses, commission, earnings below the Lower Earnings Limit and Secondary Threshold, and earnings of employees under 21 and apprentices under 25.
Who pays? Only employers with an annual pay bill of over £3 million will have to pay and report the levy, because 0.5% of £3 million equals the £15,000 allowance, which fully offsets the liability.
Connected employers: Where the connected companies or connected charities rules apply, a group shares a single £15,000 allowance, meaning employers within a group with a combined pay bill over £3 million may each face a levy liability even if their individual pay bill is below £3 million.
Reporting and payment: Although it is an annual charge, employers report and pay the levy each tax month alongside other PAYE liabilities via the Employer Payment Summary (EPS). The monthly calculation is based on the total pay bill for that tax month.
Important restriction: The £15,000 levy allowance cannot be used to pay for apprenticeship training.
Legislative history: The levy was announced in the Summer Budget 2015 and came into force on 6 April 2017, following the Finance Act 2016 receiving Royal Assent in September 2016. The detailed rules are implemented through the Income Tax (Pay As You Earn) Regulations 2003.
Citation sources
Each employer has an annual Apprenticeship Levy allowance of £15,000 to offset against their levy liability. The effect of this allowance is that only those employers with an annual pay bill of over £3 million will have to pay and report the levy. This is because 0.5% of an employer’s £3 million pay bill is £15,000, which is fully removed by the £15,000 Apprenticeship Levy allowance. However, where the connection rules apply, a pay bill less than £3 million may attract a levy liability, dependin
The Apprenticeship Levy is an annual charge, but employers report and pay it each tax month, as they do other PAYE liabilities. Levy paying employers must report the levy on the Employer Payment Summary (EPS). The monthly calculation of levy liability is based on the total pay bill for the tax month, which may include weekly as well as monthly pay runs. For more information about ‘pay bill’ can be found at ALM07000. An employer’s software may have been updated to calculate their levy liability.
PART 6 Apprenticeship levy Basic provisions Apprenticeship levy 98 1 A tax called apprenticeship levy is to be charged in accordance with this Part. 2 The Commissioners are responsible for the collection and management of apprenticeship levy.
The Apprenticeship Levy is charged at a rate of 0.5% on an employer’s annual pay bill. An annual Apprenticeship Levy allowance of £15,000 means that only those employers with an annual pay bill of over £3 million will have to pay and report the levy. This is because 0.5% of an employer’s £3 million pay bill is £15,000, which is fully removed by the £15,000 Apprenticeship Levy allowance. However, where the connection rules apply, a pay bill less than £3 million may attract a levy liability, depen
PART 6 Apprenticeship levy Anti-avoidance Application of other regimes to apprenticeship levy 104 1 In section 318(1) of FA 2004 (disclosure of tax avoidance schemes: interpretation), in the definition of “tax”, after paragraph (d) insert— da apprenticeship levy, . 2 In section 206(3) of FA 2013 (taxes to which the general anti-abuse rule applies), after paragraph (da) insert— db apprenticeship levy, . 3 Part 4 of FA 2014 (follower notices and accelerated payments) is amended in accordance with
PART 6 Apprenticeship levy Basic provisions Charge to apprenticeship levy 99 1 Apprenticeship levy is charged if— a a person has a pay bill for a tax year, and b the relevant percentage of that pay bill exceeds the amount of the person's levy allowance (if any) for that tax year. 2 The amount charged for the tax year is equal to— N − A where— N is the relevant percentage of the pay bill for the tax year, and A is the amount of the levy allowance (if any) to which the person is entitled for the t
Pay bill is defined as all those earnings which are liable to pay Class 1 secondary NICs, and this includes: any remuneration or profit coming from employment such as wages, bonuses and commission; payments from a registered pension scheme are not considered earnings for NICs purposes - a limited group of pension payments may be subject to class 1 NICs, if paid out of an employer-financed retirement benefits scheme earnings below the Lower Earnings Limit (LEL) and the Secondary Threshold (ST) ea
The Chancellor of the Exchequer announced in the Summer Budget 2015 the introduction of a new tax charge called the Apprenticeship Levy which would apply to UK employers on or after 6 April 2017. This was followed by a formal consultation between 21 August 2015 and 2 October 2015. The government announced its proposals on the final design of the Apprenticeship Levy in a consultation response document on 21 August 2015. Draft legislation, supported by a Technical Note and an Explanatory Note were