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  5. How Does the Apprenticeship Levy Work?

How Does the Apprenticeship Levy Work?

Are you interested in knowing how does the apprenticeship levy work?

This article will explain what the Apprenticeship Levy is, how it works, and why it matters. So, let’s dive in!

How Does the Apprenticeship Levy Work

What is the Apprenticeship Levy?

The Apprenticeship Levy is a government initiative in the United Kingdom to encourage employers to invest in apprenticeship programs. It was introduced in April 2017 as part of the government’s commitment to creating more industry apprenticeship opportunities.

How Does It Work?

The Apprenticeship Levy requires certain employers to contribute a fixed amount each year to support apprenticeship training. This money goes into a dedicated fund called the “Levy Pot,” Employers can use it to cover the costs of training and assessing their apprentices.

Employers Liable to Pay the Levy

The Levy applies to employers with an annual pay bill exceeding £3 million. The pay bill includes the total amount of money an employer pays its employees, such as wages, bonuses, and commissions. If the employer pays below £3 million, they do not have to pay the Levy.

Levy Calculation

Employers liable to pay the Levy contribute 0.5% of their annual pay bill as their Levy payment. However, the government provides a “Levy allowance” of £15,000 per year, which means employers only pay the Levy on their pay bill amount above £3 million minus the £15,000 allowance.

Using Levy Funds

Once an employer pays the Levy, they can access the funds within their digital Apprenticeship Service account. This account allows employers to select approved training providers and pay for apprenticeship training. The funds can be used for new apprentices or to upskill existing employees through apprenticeship programs.

Levy Transfer and Non-levy Paying Employers

Employers who don’t pay the Levy can still benefit from apprenticeships. Levy-paying employers can transfer up to 25% of their annual funds to other businesses, including non-levy-paying employers, to support their apprenticeship training. This helps to ensure that apprenticeship opportunities are available to a wider range of companies.

Benefits for Apprentices

Apprentices benefit from the Apprenticeship Levy as it encourages employers to invest in their training and development. Participating in apprenticeship programs allows young individuals like you to gain valuable skills, knowledge, and hands-on experience in specific industries. It can be a stepping stone towards a successful and fulfilling career.


The Apprenticeship Levy is an essential tool designed to promote apprenticeships in the UK. It requires larger employers to contribute a percentage of their annual pay for apprenticeship training. Employers invest in the future workforce by supporting apprenticeship programs while apprentices gain valuable skills and opportunities.

Updated on October 8, 2023

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