Apprenticeship Levy Calculator

The Apprenticeship Levy is charged at 0.5% of an employer's total annual pay bill, which includes all earnings subject to Class 1 secondary National Insurance contributions—salaries, wages, bonuses, and commissions. Every employer receives a £15,000 annual allowance that offsets the levy, meaning only employers with a pay bill exceeding £3,000,000 per year face an actual payment. The levy is calculated and paid monthly through PAYE alongside other payroll deductions.

Each month, you calculate 0.5% of your monthly pay bill and then subtract one-twelfth of the £15,000 annual allowance (£1,250 per month). If the result is negative, no levy is due for that month. Connected employers (companies linked by common ownership) must share the single £15,000 allowance between them, allocated at the start of the tax year via a declaration to HMRC.

Levy payments are converted into digital funds in your Apprenticeship Service account, topped up by 10% by the government. These funds can only be spent on approved apprenticeship training and assessment with registered providers. Unspent funds expire 24 months after they appear in the account, so timely planning of apprenticeship starts is important.

Apprenticeship Levy basics. Employers with annual pay bill over £3 million pay 0.5% Apprenticeship Levy on the total pay bill, minus a £15,000 annual allowance. Pay bill = total earnings subject to employer NI (Class 1 secondary). Example: £4m pay bill pays £4m × 0.5% − £15k = £5,000 levy. Pay bill £10m pays £35k. Levy collected monthly via PAYE.

How to use the levy funds. Levy paid is held in the employer's digital apprenticeship service account, plus 10% top-up from government. Funds can be spent on: apprenticeship training (not salary of apprentice — only the training cost paid to provider). Funds expire after 24 months. Unused levy is effectively a tax that wasn't reclaimed. Many large employers don't use their full levy — leaving millions on the table.

Apprenticeship levy transfers. Levy-paying employers can transfer up to 50% of their unused funds to smaller businesses (non-levy payers) to fund apprenticeships. Useful for: supply chain partner upskilling, charity support, sector development. Apply via apprenticeships.gov.uk. Many large UK employers (e.g. retail chains, professional services) transfer funds to smaller suppliers — gets value out of the levy and supports their network.

Non-levy employer benefits. SMEs (pay bill under £3m) get 95% government funding toward apprenticeship costs (employer pays only 5%). For apprentices aged 16-21 in small employers: government pays 100%. Plus the £1,000 incentive payment for hiring 16-18 year-old apprentices. Excellent value for upskilling and entry-level recruitment — many SMEs underuse despite minimal cost.