Frequently Asked Questions

Apprenticeship Levy is an amount paid at a rate of 0.5% of an employer’s annual pay bill.

The employer will have to pay Apprenticeship Levy each month if they:

• have an annual pay bill of more than £3 million
• are connected to any companies or charities for Employment Allowance purposes and have a combined annual pay bill of more than £3 million

The apprenticeship levy was introduced in April 2017 – and is still as relevant today – but do you know what it means for your business and the training of apprentices?

The apprenticeship levy is a tax that UK businesses have to pay. These tax funds are added into a pot that is then used to fund apprenticeships for the employer. This ensures that businesses have enough funds to train and upskill their new workforce.

The apprenticeship levy is a compulsory tax for UK business who have a pay bill OVER £3 million each year. If you have a business that has a pay bill UNDER £3 million a year, you are exempt from the levy tax.

Pay Apprenticeship Levy – GOV.UK

It was launched in April 2017 as a component of the Government’s apprenticeship reforms, aiming to enrol 3 million apprentices by the year 2020.

There are many benefits of an apprenticeship levy, including:

• Skilled workforce development
• Reduced skill gaps
• Customised training per industry
• High employee retention rates
• Positive public image
• Diversity and inclusion
• Economic growth

The two main objectives of the apprenticeship levy are to cover the cost of training and to support the salaries of apprentices. The levy can also be used by smaller businesses, ensuring they have the opportunity to contribute to the developing workforce.

If you are a UK business that has a pay bill OVER £3 million each year, you are legally obligated to pay the apprenticeship levy tax.

If you meet the criteria, yet fail to pay the levy tax, you could be subject to legal implications depending on the extent of the evasion. It is always better to pay the levy fees and benefit from the apprenticeship funds.

You can claim levy funds if you are training apprentices. If you have overpaid your apprenticeship levy during the tax year, you will receive a refund as a PAYE credit.

Yes, if you wish to upskill existing employees and strengthen your workforce, you can use the apprenticeship levy funds.

In the 2025 Autumn Budget, the government announced that from 1 August 2026:

• where an employer does not pay the apprenticeship levy, government will fund all the apprenticeship training and assessment costs (up to the funding band maximum) for those apprentices who are aged between 16 and 24 years old (or 15 years of age if the apprentice’s 16th birthday is between the last Friday of June and 31 August) at the start of their apprenticeship training
• where a levy payer has insufficient funds, the employer co-investment rate will be 25% (this was previously 5%). NB: a further announcement regarding co-investment for these employers was made in July 2026 (see section below)
• the automatic 10% top-up to levy funds would be removed
• for employers who pay the levy, funds (in their apprenticeship service account) will now expire after 12 months (this was previously 24 months)
• from October 2026, employers who do not pay the levy will be able to get a hiring payment of £2000 when recruiting new apprentices aged 16 to 24 years old (see funding rules for more information on eligibility criteria)
• In June/July 2026, the following was announced:
• where a levy payer has insufficient funds, government will fund all the apprenticeship training and assessment costs (up to the funding band maximum) for those apprentices who are aged between 16 and 24 years old (or 15 years of age if the apprentice’s 16th birthday is between the last Friday of June and 31 August) at the start of their apprenticeship training. This applies to new apprenticeship starts from 1 August 2026
• the link between collecting the employer co-investment and releasing the completion payment has been removed. This applies to apprenticeships completing on or after 1 August 2026

More information can be found here: Apprenticeship funding – GOV.UK

The apprenticeship levy is charged at 0.5% of your annual pay bill.

Employers have 12 months to spend their Apprenticeship Levy funds after they enter their Apprenticeship Service account. This change is effective from 1 August 2026 and applies to new funds entering accounts from that date onwards. Employers will need to manage two sets of expiry timelines simultaneously during the transition period, as funds already in accounts before 1 August 2026 will continue to follow the current 24-month expiry rule.