What Is The Apprenticeship Levy?

​The UK faces a growing challenge, a shortage of skilled workers across industries from construction and engineering to healthcare and digital technology. To help address this, the government introduced the Growth & Skills Levy (previously called the apprenticeship Levy): a funding mechanism designed to increase the availability and quality of apprenticeships, while encouraging employers to invest in their workforce.

But what exactly is it, who pays it, and how does it work in practice? Let’s take a closer look.

Understanding The Apprenticeship Levy: What Is It?

The Apprenticeship Levy is a UK tax on employers, introduced to fund apprenticeship training nationwide. It is collected by HM Revenue & Customs (HMRC) through the PAYE system and managed by the Digital Apprenticeship Service (DAS) in England. Employers subject to the Levy pay 0.5% of their annual pay bill and receive an annual £15,000 allowance to offset against their contribution, meaning only employers whose annual pay bill exceeds around £3 million are required to pay.

Apprenticeships funded through the Levy are designed to be flexible and accessible. Each apprenticeship standard has a defined minimum number of guided training hours, ensuring consistent, high-quality learning while allowing employers to structure programmes around operational needs. The minimum programme duration is eight months, and apprentices aged 19 and over are only required to complete Level 2 English and Maths if their employer deems it necessary.

Rather than being just another tax, the Levy acts as a ring-fenced training fund, money businesses can use to train both new apprentices and existing employees through approved apprenticeship programmes.

Who Is Required To Pay The Apprenticeship Levy?

Any organisation in the UK, whether a private company, public body, or charity, must pay the Growth & Skills Levy if its annual pay bill exceeds £3 million. Smaller organisations below this threshold do not pay the Levy but can still access government-supported apprenticeship funding through co-investment, where the government covers 95% of the training cost and the employer contributes 5%.

For groups of connected companies, the £15,000 annual allowance is shared across the group, meaning each organisation within that structure contributes proportionally.

How Much Is the Apprenticeship Levy?

The calculation is straightforward:

• Employers pay 0.5% of their annual pay bill,
• Minus the £15,000 allowance,
• Resulting in contributions only when the pay bill exceeds £3 million.

For example, an employer with a £5 million annual payroll would contribute around £10,000 per year to the Apprenticeship Levy. Payments are collected monthly via PAYE, ensuring they stay aligned with the company’s real-time payroll activity.

How The Growth & Skills Levy Works

Funds collected through the Levy are deposited into each employer’s Digital Apprenticeship Service (DAS) account, which acts as an online wallet for training.

Employers can then use this account to:

• Access approved apprenticeship training providers,
• Pay for End-Point Assessments (EPAs),
• Track contributions, government top-ups, and remaining balances.

To encourage usage, the government adds a 10% top-up to monthly payments for employers in England. However, funds expire after 24 months if they’re not used, returning to the Treasury, so timely planning and spending are essential. Thankfully, since April 2025, employers now have greater flexibility to use their funds for a wider range of approved skills and training programmes, not just apprenticeships.

For non-levy-paying employers, apprenticeships are still highly affordable. The government covers 95% of the cost through co-investment, with the employer contributing just 5%. Alternatively, smaller businesses can receive up to 50% of unspent funds from larger employers to cover their training costs in full.

Benefits Of The Apprenticeship Levy

While the Levy is mandatory for larger employers, it brings substantial advantages:

1. Funded Training: Employers can directly access funding for apprenticeship training and assessment through their digital account, with the government adding a 10% top-up.
2. Workforce Development: Levy funds can be used to upskill existing employees of any age, not just new starters.
3. Improved Retention and Productivity: Apprenticeships provide structured development pathways that help retain talent and close critical skills gaps.
4. Flexibility and Collaboration: Levy-paying employers can transfer up to 50% of their funds to other organisations, such as supply chain partners or smaller businesses, helping to strengthen skills across their sector.

For HR and L&D leaders, this creates a strategic opportunity to turn a mandatory contribution into a meaningful investment in people, performance, and long-term capability.

Turning Levy Apprenticeships Into Strategic Value

Too many organisations still treat the Levy as a tax, rather than an opportunity. In reality, it’s a ready-made budget for training that can support leadership development, technical skills, sustainability, digital transformation and more.

By planning ahead and partnering with an approved provider, employers can ensure their levy apprenticeships align directly with business goals, delivering both measurable ROI and meaningful impact.

At Impact Academy, we help levy-paying employers make the most of their apprenticeship funds. From identifying suitable programmes to managing the process end-to-end, we ensure your training investments support your strategy, not just compliance. Contact us to learn how to use your Growth & Skills Levy effectively and build the skills your business needs for the future.

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