Apprenticeship Levy Calculator UK

The Apprenticeship Levy is often described as a tax on big employers, which is accurate but incomplete. It's really a use-it-or-lose-it training budget collected through payroll: employers above the threshold pay 0.5% of their pay bill, the money lands in a digital account, and it either funds apprenticeship training or expires back to the Treasury. A surprising number of levy-paying employers treat it purely as a tax and let substantial sums evaporate, which is the most expensive way to handle it.

This calculator works out whether you're liable, how much you'll pay, and what you'll have available to spend.

Who pays

Any employer whose annual pay bill exceeds £3 million. Your pay bill is total employee earnings subject to Class 1 secondary (employer) National Insurance: wages, bonuses, commission and pension contributions paid through payroll, but not benefits in kind or payments already outside Class 1 NI. Sector is irrelevant, private companies, charities and public bodies are all in scope.

The calculation

The levy is 0.5% of your full pay bill, offset by a £15,000 annual allowance. Because 0.5% of £3 million is exactly £15,000, the allowance zeroes out the levy for anyone at or below the threshold, which is why the £3 million figure is the effective entry point:

• Pay bill £2.5m → levy £12,500 − allowance = £0
• Pay bill £4m → levy £20,000 − £15,000 = £5,000
• Pay bill £10m → levy £50,000 − £15,000 = £35,000

It's reported and paid monthly through PAYE alongside tax and NI, with the allowance spread across the year (£1,250 a month, cumulative). Note that even employers under the threshold must report levy figures to HMRC if their pay bill in the previous year exceeded £3 million, or if they expect it to this year.

Connected companies share one allowance

A crucial anti-fragmentation rule: companies under common control, group structures, connected charities, share a single £15,000 allowance between them, and the £3 million test applies to the combined pay bill. You choose how to split the allowance across the group at the start of the tax year, and that split can't be changed until the next year. Splitting one business into several entities doesn't escape the levy.

What happens to the money

Levy payments go into your apprenticeship service account. In England, funds entering accounts until July 2026 include a 10% government top-up; new funds entering from August 2026 no longer receive that top-up. The funds can be spent on apprenticeship training and end-point assessment with approved providers, for new hires or existing staff at any level, including degree apprenticeships and senior leadership programmes. They cannot fund wages, travel, or general training that isn't an approved apprenticeship standard.

The catch: funds already in your account before August 2026 keep their original 24-month expiry, but new funds entering from August 2026 expire after 12 months on a first-in-first-out basis. Unspent money returns to the Treasury. Levy payers who can't use their full pot can also transfer up to 50% of their annual funds to other employers, smaller firms in their supply chain, for example, which is often better than letting it expire.

If you're under the threshold

Non-levy employers aren't shut out of apprenticeship funding, smaller employers pay only a modest co-investment share of training costs, with government covering the rest, and full funding is available in some cases for the smallest employers and youngest apprentices. If you're near the £3 million line, it's worth modelling whether upcoming hiring plans will tip you over, since crossing the threshold changes both your costs and your funding options.

Worked example

A company with a £6.2 million pay bill:

• Levy: 0.5% x £6,200,000 = £31,000
• Less allowance: £31,000 − £15,000 = £16,000 a year (£1,333 a month through PAYE)
• Available to spend from funds entering accounts until July 2026 (England, with 10% top-up): £17,600; new funds entering from August 2026 would not receive the top-up
• For existing pre-August-2026 funds, unused amounts expire after 24 months; new funds entering from August 2026 expire after 12 months, so the real question is whether the training budget gets used before it is lost

This is general guidance, not tax advice. For your specific liability, particularly around connected companies, check gov.uk or speak to your accountant or payroll provider.