What is the apprenticeship levy?

The apprenticeship levy is a UK tax on larger employers that funds apprenticeship training. If your annual pay bill is over £3 million, you pay 0.5% of it into a digital account and spend those funds on training and end-point assessment (EPA), the independent check at the end of an apprenticeship.

0.5% of pay bill | £3m threshold | 24 months to spend it.

How the levy works

You report and pay the levy to HM Revenue and Customs (HMRC) each month through PAYE, the same way you handle tax and National Insurance. The government applies a £15,000 allowance that offsets what you owe, so the levy only bites once 0.5% of your pay bill passes £15,000 (a pay bill above £3 million). What you pay then appears as funds in your apprenticeship service account, topped up by a 10% government contribution. You have 24 months to spend each month's funds before they expire, so the levy rewards employers who plan ahead. From August 2026, employers spending beyond their levy funds, and non-levy employers, contribute 25% of any extra training cost, with the government covering 75%.

The levy at a glance

0.5%

of your annual pay bill
£3m

pay-bill threshold to pay it
£15,000

annual levy allowance
24

months before unspent funds expire

What you can spend it on

Levy funds pay for the training and end-point assessment of apprenticeships, at any level from level 2 to a master's-level apprenticeship. You can train new recruits or existing staff, including senior people, as long as the apprenticeship gives them substantial new skills and makes up at least half their working time over the programme. The funds cannot be used for apprentice wages, travel, work placements or the running costs of your business. If you have more levy than you can use, you can transfer up to half of it to another employer (see below).

Good to know

The levy applies UK-wide, but you can only spend your digital funds on apprentices working mainly in England. Scotland, Wales and Northern Ireland run their own systems, funded through a share of the levy (see the FAQs).

Passing on unused levy

If your funds would otherwise expire, you can transfer up to 50% of your annual levy to another employer of your choice, often a smaller business in your supply chain or community. It costs you nothing beyond funds you were not going to spend, and it backs skills where they are needed.

How levy transfers work

If you do not pay the levy

Most smaller employers do not pay the levy. You still access the same funding: the government covers the large majority of training costs and, in many cases, the full cost for younger apprentices. See how funding works for non-levy employers.

Funding for smaller employers

Apprenticeship levy: common questions

Who pays the apprenticeship levy?

Employers with an annual pay bill over £3 million, across all sectors, public and private. That is about 2% of UK employers. Connected companies and charities share a single £3 million threshold and one £15,000 allowance.

When was the apprenticeship levy introduced?

It started in April 2017, replacing the previous grant-based system for funding apprenticeships.

What can the apprenticeship levy be used for?

The training and end-point assessment of apprenticeships at any level, for new or existing staff. It cannot pay wages, travel or other running costs.

What happens to unspent levy funds?

Each monthly entry expires 24 months after it enters your account. You can spend it on your own apprenticeships or transfer up to half of your annual funds to another employer before it expires.

Do connected companies share one allowance?

Yes. A group of connected companies or charities gets one £15,000 allowance, which you choose how to divide at the start of the tax year.

How does the levy work in Scotland, Wales and Northern Ireland?

You pay the levy wherever you are in the UK, but the digital account funds apprentices in England. The devolved nations receive a share of levy funding and run their own apprenticeship systems.

Can the levy pay for existing employees?

Yes, as long as the apprenticeship teaches substantial new skills relevant to their role. It is a common way to fund leadership and professional development.

The 2026 change in one line

From August 2026, the employer contribution to costs beyond your levy funds rises from 5% to 25%. Planning your levy spend now protects you from paying more later.