The apprenticeship levy is a payroll tax that applies to larger employers. It funds apprenticeship training and sits within PAYE reporting.
For 2026/27, the core rules remain unchanged. Employers need to assess liability, calculate contributions correctly and manage funds through the digital apprenticeship service.
The levy applies to employers with an annual pay bill above £3 million.
It is charged at 0.5% of the total pay bill. Employers receive a £15,000 annual allowance, which reduces the amount payable.
If the levy calculation falls below £15,000, no payment is due.
|
Step |
Calculation |
|
Total pay bill |
All earnings subject to Class 1 NICs |
|
Levy charge |
0.5% of total pay bill |
|
Less allowance |
£15,000 annual allowance |
|
Amount due |
Levy payable through PAYE |
The allowance spreads across the tax year and is applied through payroll each month.
Connected companies must share the £15,000 allowance between them.
The pay bill includes all earnings subject to Class 1 National Insurance.
This includes salary, wages, bonuses and commissions. Some pension contributions also apply where National Insurance is due.
Benefits in kind and earnings below the National Insurance threshold do not form part of the pay bill.
Employers report and pay the apprenticeship levy through PAYE.
The levy is calculated each pay period and reported through the Full Payment Submission. Payment is made alongside PAYE tax and National Insurance.
Employers with a pay bill above £3 million must report the levy even if no payment is due after applying the allowance.
Levy payments are credited to a digital apprenticeship account.
Funds can be used to pay for approved apprenticeship training and assessment.
A 10% government top-up applies to funds in the account. Any unused balance expires after 24 months.
Employers can transfer up to 25% of their annual levy funds to other businesses.
Employers with a pay bill below £3 million do not pay the levy.
They can still access apprenticeship funding through co-investment. Under this model, the employer contributes 5% of training costs and the government funds the remaining 95%.
No structural changes apply for 2026/27.
Focus remains on improving use of levy funds and reducing unused balances. Employers should keep track of available funds and plan training to avoid expiry.
The apprenticeship levy links payroll, reporting and workforce planning. Accurate calculations and clear oversight keep your position compliant.
David Howard supports employers with payroll and tax compliance, giving you clear reporting and confidence in your processes.
Image credit: Mikhail Nilov on Pexels