What is the apprenticeship levy?
The apprenticeship levy is a tax on UK employers with an annual pay bill of more than £3 million. It is charged at 0.5% of the total pay bill, minus a £15,000 yearly allowance. Employers in England can use the money they pay to fund approved apprenticeship training.
The levy started in April 2017. It is collected through PAYE alongside income tax and National Insurance. Because of the £15,000 allowance, only employers with a pay bill above £3 million actually pay. That covers around 2% of employers. For example, an employer with a £5 million pay bill owes 0.5% of that, which is £25,000. After the £15,000 allowance it pays £10,000 a year.
In England, levy payers get a digital account to spend on apprenticeship training, with a government top-up. Unspent funds expire after 24 months. Employers can transfer some funds to other businesses, such as their suppliers. Smaller employers who do not pay the levy get most of their apprenticeship training costs covered by the government. Levy payers can transfer up to half of their unused funds.
Scotland, Wales and Northern Ireland receive a share of levy money but run their own skills systems. Since the levy began, apprenticeship starts in England have fallen, especially at lower levels and among young people. Critics say firms used funds to rebadge management training. The government is reforming it into a wider growth and skills levy with more flexible uses.
Who it affects: Employers with pay bills over £3m
The left tends to support the levy but wants more of the money focused on young people and lower-level apprenticeships.
The right tends to see it as a payroll tax that firms cannot spend flexibly and wants it simplified or cut.
Britain is split. Now you decide.
Set the apprenticeship levy rate in the WeDecide Budget and see how it shifts revenue, skills and business mood.
Play WeDecide freeCommon questions
Who pays the apprenticeship levy?
Employers with an annual pay bill over £3 million, at 0.5% minus a £15,000 allowance.
Do small businesses pay the apprenticeship levy?
No. They do not pay it, and the government funds most of their apprenticeship training costs.
What happens to unspent levy funds?
In England they expire after 24 months if not used.