In the Spotlight: Understanding the Apprenticeship Levy

June 13, 2023

In the first of our In the Spotlight series, we’re exploring the world of modern-day apprenticeships.  We’ll establish which organisations needs to pay the Apprenticeship Levy and how to calculate their contribution.

Table of Contents

What is the Apprenticeship Levy – and does my organisation have to pay it?

The Apprenticeship Levy is paid by all UK companies (including linked companies) with an annual pay bill of £3,000,000 or more.  Employers that fall into this category are then required to pay an additional 0.5% of their pay bill into the Levy.  The payment is then offset with a single payment up to a maximum value of £15,000 per company or group of connected companies, per year.

Below are some example calculations to help demonstrate what this could mean for your business.

Example 1: Annual pay bill is £3,000,000;

3,000,000 [pay bill] x 0.5% [levy] – £15,000 [offset payment] = £0 [levy payment due]

Example 2: Annual pay bill is £40,000,000;

40,000,000 [pay bill] x 0.5% [levy] – £15,000 [offset payment] = £185,000 [levy payment due]

To learn more about who qualifies for paying the Levy, click here.

Note: The Apprenticeship Levy is considered a deductible expense for Corporation Tax

Understanding what to include in your annual pay bill calculation.

The employer’s annual pay bill is all payments to its employees that are subject to Class 1 Secondary National Insurance contributions, loosely speaking, this is all wages, bonus payments and any commission payments.

There are certain employee groups which should not be included in your pay bill calculation;

Employers should also exclude earnings on Class 1A NICs – such as benefits in kind.

To find out more about the annual pay bill and what to include, click here.


How to calculate and pay your Apprenticeship Levy bill.

You will be required to pay your Apprenticeship Levy monthly, as part of your PAYE bill.  As a Levy paying employer, it is your responsibility to report on how much you owe each month to HMRC.  This should be done through your Employer Payment Summary and should include;

For more information on calculating your Apprenticeship Levy into PAYE schemes and payment schedules, click here.


To find out more including how to access your funds, read our next blog in this series; Apprenticeships Part 2 – How to access funds from the Apprenticeship Levy


Never miss our top news, sign up to our newsletter today and get all the latest HR trends and insights straight to your inbox.

If your organisation needs HR advice or support Vero HR can help. We will provide you with dedicated HR services to effectively manage your workforce and assist with all your HR requirements.  Contact us today to find out how we can help your business.

Sign up to our newsletter!