Apprenticeship Levy 2026/27

Who pays

You pay Apprenticeship Levy each month if you have an annual pay bill of more than £3 million, or if you are connected to any companies or charities for Employment Allowance purposes and your combined annual pay bill is more than £3 million. The connection rules are the same for both. Every sector that crosses the threshold pays; paying an industry training levy such as the Construction Industry Training Board levy does not exempt you.

Your annual pay bill

The pay bill is all payments to employees that are subject to employer Class 1 secondary National Insurance contributions, such as wages, bonuses and commissions. It must include payments to employees earning below the secondary threshold and lower earnings limit, employees under 21 and apprentices under 25. It does not include earnings of employees under 16, of employees who are not subject to UK National Insurance legislation, or earnings on which Class 1A is payable, such as benefits in kind.

For the employer NI side of the same payroll, see the Employer NI Calculator and the Employer Cost Calculator, which adds the levy to the cost of a hire.

The £15,000 allowance

The allowance reduces the levy you pay by £15,000 across the year. An employer not connected to another company or charity has an allowance of £15,000 a year. If you start or stop being an employer part-way through the tax year you can use the full annual allowance against the levy you owe. Unused allowance cannot be carried into the next tax year.

Connected companies or charities have only one £15,000 allowance to share. You can divide it between all your PAYE schemes and your connected companies or charities, and you report how you divided it the first time you have to pay the levy. You cannot change your share during the tax year; you can decide the split again at the start of the next one. Public bodies other than charities each get a full allowance. NHS trusts and other health service bodies follow the connected-companies rules.

How the monthly figure is worked out

The levy is charged at 0.5% of your annual pay bill. GOV.UK sets out the monthly method:

1. First month of the tax year: divide the annual allowance by 12 and subtract that from 0.5% of the month's pay bill.
2. Each later month: take 0.5% of the pay bill for the year to date, subtract the allowance for the year to date, then subtract the levy already paid.
3. If you start paying part-way through the year, your allowance for the first month you report is the annual allowance divided by 12, multiplied by the months since the start of the tax year.

HMRC's Basic PAYE Tools can work out the amount.

Reporting and paying

Report the levy each month on your Employer Payment Summary (EPS), including the part of the annual allowance assigned to that PAYE scheme and the levy you owe so far this tax year. You pay it every month as part of your PAYE bill, and an overpayment comes back as a PAYE credit. Connected companies or charities each report their own levy.

You must start reporting at the start of the tax year if your annual pay bill, with connected employers, was over £3 million in the previous year or you expect it to be over £3 million this year. If it unexpectedly rises above £3 million, start reporting when that happens. Once you have started, keep reporting to the end of the year even if the pay bill ends up lower. Keep the records you used for at least 3 years after the tax year they relate to. The separate Employment Allowance reduces employers' Class 1 NI, not the levy.

Sector rules

GOV.UK lists specific rules for these sectors. All must still pay the levy once their pay bill, with connected employers, is over £3 million.

• Franchises: one allowance for all the franchises under your control.
• Off-payroll working: payments to intermediaries caught by the off-payroll rules count towards the pay bill for public authorities and for medium and large clients outside the public sector.
• Short-lived companies: liable if they owe Class 1 secondary NI; a company set up part-way through the year has a full allowance.
• Managed service companies: may pay the levy even with a pay bill below the threshold if connected to another employer.
• Employment and recruitment agencies: liable if they supply labour and pay Class 1 secondary NI on those workers' earnings.
• Joint ventures: a 50/50 joint venture is not connected to either parent, so each of the three has its own allowance.
• Schools: the governing body or the local authority is the employer, depending on the school type; each has its own allowance, and a multi-academy trust has one.