What counts towards the 'pay bill' when calculating the levy?

Under Section 86 of the Finance Act 2016, your 'pay bill' consists of the total gross earnings of all employees liable to employer Class 1 secondary National Insurance contributions (or that would be liable if the secondary threshold did not apply). This includes regular wages and salaries, cash bonuses, commissions, overtime, statutory sick pay, and statutory maternity pay. It excludes benefits in kind reported on P11D (such as company cars), payments to genuine self-employed contractors, and earnings of workers not subject to UK National Insurance.

How does the monthly £1,250 allowance work in real-time payroll?

HMRC operates the levy on a cumulative monthly basis through PAYE Real Time Information (RTI). The £15,000 annual allowance is split into 12 equal monthly tranches of £1,250. Each month, the employer calculates 0.5% of their cumulative year-to-date pay bill, deducts the cumulative allowance (e.g. £2,500 in Month 2, £6,250 in Month 5), and subtracts the levy already paid in earlier months. Any unused monthly allowance carries forward to subsequent months within the same tax year, but cannot be carried into a new tax year.

What is the 10% government top-up in the Digital Apprenticeship Service (DAS)?

For employers in England, levy payments are automatically credited to their online Digital Apprenticeship Service (DAS) account. The UK Government applies an automatic 10% monthly top-up to these funds. For example, if your company pays £10,000 in Apprenticeship Levy in a given month, HMRC and the Department for Education credit your DAS account with £11,000. These funds can only be spent on training and assessment for approved apprenticeship standards with registered training providers.

What is the 24-month expiry rule for Apprenticeship Levy funds?

DAS levy funds operate on a strict 24-month rolling expiry timetable. Any funds that remain unspent exactly 24 months after they entered your DAS account are automatically clawed back and returned to HM Treasury. Unspent funds cannot be refunded in cash or used for general corporate expenses. Employers can prevent funds from expiring by expanding their internal apprentice hiring, upskilling existing staff through degree apprenticeships, or transferring funds.

Can an employer transfer unused Apprenticeship Levy funds to other businesses?

Yes. Under apprenticeship funding regulations, levy-paying employers can transfer a significant portion of their annual levy funds (up to 50% under updated reforms) to other employers. Businesses commonly transfer surplus levy funds to key suppliers, supply chain partners, local SMEs, or registered charities to help them fund 100% of their apprentice training costs.

How does co-investment work for employers with pay bills under £3 million?

Employers with an annual pay bill of £3,000,000 or less pay £0 in Apprenticeship Levy. When a non-levy employer wishes to train an apprentice, they access government co-investment: the government pays 95% of the training and assessment costs directly to the training provider, while the employer pays only the remaining 5%. Furthermore, small employers with fewer than 50 staff who recruit a 16–18 year old apprentice receive 100% government funding (employer pays £0).

How do connected companies and corporate groups handle the £15,000 allowance?

Under Section 89 of the Finance Act 2016, connected companies (such as parent companies and their subsidiaries) or connected charities are entitled to only ONE £15,000 annual levy allowance between the entire group. At the start of the tax year, the group must notify HMRC how the single £15,000 allowance is allocated across the group entities (e.g. 100% to the main operating entity, or split proportionately). Once agreed, the allocation cannot be altered for that tax year.

Statutory 2026/27 Finance Act 2016 Engine

Apprenticeship Levy Calculator UK

Calculate your statutory 0.5% Apprenticeship Levy on pay bills over £3 million, apply the annual £15,000 allowance, and model 10% DAS government top-ups.

Statutory 2026/27 Finance Act 2016 Engine

UK Apprenticeship Levy & DAS Calculator

Model 0.5% levy liability, £15,000 allowance, 10% government top-ups, and co-investment training budgets.

View Cadence:

Select Representative Pay Bill Scenario:

Annual Gross Pay Bill (£)Threshold: £3,000,000

Total gross earnings of all UK employees liable to employer Class 1 secondary National Insurance (including wages, bonuses, commissions).

Statutory Annual Allowance Allocation (£)Statutory Cap: £15,000/yr

Standalone employers use £15,000 (£1,250/mo). Connected companies or corporate groups must split this single £15,000 statutory allowance.

1. Gross Levy (0.5%)

£22,500.00

0.5% × £4,500,000 pay bill

2. Offset Allowance

-£15,000.00

Fully offset against gross levy

3. Net Levy Payable

£7,500.00

Effective rate: 0.167% of pay bill

4. Available DAS Budget+10% HMRC

£8,250.00

Includes £750.00 free top-up

Apprenticeship Training & Co-Investment Simulator

Simulate cohort spend against your DAS levy funds or 95% co-investment

Apprenticeship Standard / Role:Typical duration: 24 months. Statutory funding cap applies.

Number of Apprentices to Enrol:

Total Training Cap: £33,000.00

Levy Fund Transfer Cap (50%):£4,125.00

Can be transferred to supply chains, charities, or SMEs to fund their apprentices.

Training Funding Breakdown for 3 × Level 4 Apprentice(s)

Paid via DAS Levy Funds

£8,250.00

Funded from your 0.5% levy contributions

Unspent DAS Funds (24-mo Expiry)

£0.00

Funds expire after 24 months if unspent

Shortfall Co-Investment Cost (5%)

£1,237.50

Government funds remaining 95% (£23,512.50)

The 24-Month Rolling Expiry Rule Warning

Levy payments enter your Digital Apprenticeship Service (DAS) account monthly and expire exactly 24 months after they appear if not committed to an approved apprenticeship training provider. Unspent levy funds are permanently returned to the Treasury and cannot be reclaimed.

How the UK Apprenticeship Levy Works (Statutory Framework)

The UK Apprenticeship Levy was enacted under Part 6 of the Finance Act 2016 to fund employer-led vocational training and degree apprenticeships across England, Scotland, Wales, and Northern Ireland. It operates as an employment tax collected monthly by HM Revenue & Customs (HMRC) through the standard PAYE Real Time Information (RTI) reporting system.

All UK employers with an annual pay bill exceeding £3,000,000 are subject to the levy. The gross levy is charged at a flat rate of 0.5% of total pay bill. However, each employer is granted an annual statutory allowance of £15,000 under Section 85 of the Act, which directly offsets the gross charge.

The £3,000,000 Threshold Mechanics

The reason £3,000,000 is the critical threshold is purely mathematical:

£3,000,000 × 0.5% = £15,000 Gross Levy
£15,000 Gross Levy − £15,000 Statutory Allowance = £0.00 Net Levy Due

Any payroll below £3m produces a gross levy smaller than £15,000, resulting in zero payable liability. For every £1,000,000 in pay bill above £3,000,000, the employer incurs exactly £5,000 in net annual Apprenticeship Levy.

The Digital Apprenticeship Service (DAS) & 10% Top-Up

In England, levy payments declared on the monthly Employer Payment Summary (EPS) are converted into digital vouchers deposited into the employer's Digital Apprenticeship Service (DAS) account. Crucially, the UK Government adds an automatic 10% monthly top-up to every pound levy-paying employers contribute.

For instance, an employer with a £6,000,000 pay bill pays £15,000 in net annual levy (£1,250 per month). With the 10% top-up, HMRC credits the business with £16,500 annually (£1,375 per month) in ring-fenced training funds to spend on accredited training providers.

Co-Investment Rules for Non-Levy Employers

Businesses with a pay bill under £3 million are not excluded from government apprenticeship funding. Instead, they access government co-investment under the Apprenticeships, Skills, Children and Learning Act 2009:

95% Government Co-Investment: The government pays 95% of the agreed apprenticeship training costs directly to the training provider. The employer pays only the remaining 5%.
Small Employer Exemption (100% Funding): Employers with fewer than 50 employees who hire an apprentice aged 16 to 18 (or aged 19 to 24 who has been in local authority care) pay £0 (100% funded) up to the funding band maximum.

Frequently Asked Questions

Clear answers based on official HMRC rules and statutory guidance.

The UK Apprenticeship Levy is a statutory payroll tax introduced under Part 6 of the Finance Act 2016. It applies to all UK employers across both the private and public sectors with an annual pay bill exceeding £3,000,000. It is charged at a flat rate of 0.5% of the employer's total gross pay bill, but every employer receives an annual statutory allowance of £15,000 to offset against the gross levy liability. Because 0.5% of £3,000,000 equals exactly £15,000, only businesses with payrolls above £3m pay any net levy.

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Check the connected-employer allowance

The Apprenticeship Levy uses the relevant annual pay bill and allowance allocation. Connected employers share an allowance rather than receiving one each.

The levy liability and the balance available for apprenticeship training are different. Confirm the employer group and payroll reporting position before using the estimate.

Check the rules for your circumstances

Apprenticeship Levy

Official guidance supports the rules described here; it does not approve or certify this calculator. Confirm dates, eligibility and unsupported cases before making a financial decision.