Apprenticeships levy

Produced by Tolley

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Apprenticeships levy
  • Introduction
  • Who has to pay the levy?
  • Calculation
  • Reporting and compliance issues
  • Accessing the apprenticeships fund

Apprenticeships levy


The apprenticeship levy was introduced in Finance Act 2016 and applies as from 6 April 2017. The rate of levy is 0.5 % of paybill, offset by a £15,000 ‘levy allowance’. This means that, in effect, it applies only to employers who have an annual paybill of £3 million or more a year.

The apprenticeship levy payment regime is administered by HMRC as part of the RTI system, alongside PAYE tax and NIC.

The money raised by the apprenticeships levy goes into a special training fund which is topped up by government with the aim that it can be accessed by all employers to help meet the training and assessment costs of apprenticeships.

Payments of the apprenticeship levy are deductible in computing the employer’s profits for tax purposes.

As announced at the Spring Budget 2020, the Government will look at how to improve the working of the apprenticeship levy to support large and small employers in meeting the long-term skill needs of the economy. In the meantime, the Government has said it will ensure that sufficient funding is made available in 2020/21 to support an increase in the number of new high-quality apprenticeships in small and medium-sized businesses (see Spring Budget 2020, p 74 (web) paras 2.50 and 2.51).

Who has to pay the levy?

The apprenticeship levy is payable by employers, in this content this means anyone who is a secondary contributor in respect of employed earner(s) for Class 1 NIC purposes.

Potentially all employers have to pay the levy, but the levy is offset by a levy allowance of £15,000. As the levy is 0.5% of the employer’s paybill, only employers whose annual paybill is £3 million or more will actually have any liability to pay the levy.

An employer’s paybill means the total amount of employees’ earnings that are subject to Class 1 NIC (including any earnings below the secondary threshold). This means that non-cash benefits which are subject to Class 1A NIC and anything subject

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