Employers NI and the apprenticeship levy

If your annual pay bill is more than £3 million, then you should be paying the apprenticeship levy. This tax funds apprenticeship training programmes, providing your workforce with exciting new opportunities while bringing many benefits to your business.

The levy is charged from your pay bill - all payments subject to Class 1 secondary National Insurance Contributions (NIC). So, if you’re responsible for employees’ National Insurance, then you must pay and declare the apprenticeship levy. It’s paid via PAYE alongside National Insurance and tax deductions.

What is the annual pay bill for the apprenticeship levy?

Your annual pay bill, also known as a wage bill, consists of all payments to employees subject to Class 1 National Insurance contributions, including bonuses and commissions.

Employers must include:

You must note that while employees aged 21 or younger and apprentices younger than 25 don’t pay Class 1 National Insurance, their earnings are still subject to the apprenticeship levy. This is because they are still liable for Class 1 Secondary NICs, even though the rate is 0%. So, you should include their earnings on your annual pay bill for purposes of the levy.

When paying the levy, you don’t need to include costs which you are not liable for in your pay bill. This includes:

  • Earnings of employees under 16 years old
  • Employees not subject to Class 1 National Insurance
  • Payments not subject to Class 1 National Insurance, such as private medical insurance
  • Payments to employees working abroad
  • Non-cash benefits as part of a Salary Sacrifice Agreement

How much is employers NI and the apprenticeship levy?

Legally, you need to pay Employers National Insurance Contributions on employees’ salaries. On top of this, you must pay the 0.5% apprenticeship levy charge.

You don’t need to worry about employer contributions for apprentices aged 25 and younger. For these apprentices, you don’t pay Class 1 National Insurance as long as they earn less than £967 a week. Through this scheme, you can save more money while upskilling valuable employees throughout your workforce.

To apply, employers need to give evidence, such as a written agreement or evidence of government funding.

HMRC can provide all the information you need to make sure you submit your payroll information correctly. Visit the website for more information about changing your pay codes correctly for apprentices.

Employers NI and apprenticeship levy calculator

Do you have an annual pay bill of over £3million and are unsure how much levy you'll need to pay? It’s important to know just how much. The levy is charged at 0.5% of your pay bill minus the government’s £15,000 offset - we breakdown the apprenticeship levy calculation here.

Does the apprenticeship levy include NI?

While National Insurance helps determine if employers pay the apprenticeship levy, NI is not included in the levy itself.

Instead, what’s included in the calculation is the 0.5% of your wage bill and the government allowance mentioned above.

Employers national insurance and the apprenticeship levy

At Lifetime, we have 25+ years of experience helping large businesses understand the apprenticeship levy and the benefits it can provide. We take a collaborative approach that places your workforce at the forefront, creating new opportunities for new and existing employees.

Have questions about national insurance and the apprenticeship levy? We’ll guide you through the process using our end-to-end service, so you can make the most of your apprenticeship training programme. Read more about the apprenticeship levy here. Have a specific question you’d like answered? Reach out to our team of experts.

Want to optimise your levy? We work with our partners to create bespoke apprenticeship levy strategies.

Find out how

Before working with Lifetime, we weren't using our apprenticeship levy effectively and were limited in terms of training for our internal employees. By offering apprenticeships across the business, we're creating more opportunities and a clear path of progression for our people

Marie Fuller, Learning & Development Business Partner at DX