ALM06000 - Introduction to the Apprenticeship Levy

Part 6 of the Finance Act 2016

Part 7A of the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003 No 2682)

The Apprenticeship Levy is charged at a rate of 0.5% on an employer’s annual pay bill. An annual Apprenticeship Levy allowance of £15,000 means that only those employers with an annual pay bill of over £3 million will have to pay and report the levy. This is because 0.5% of an employer’s £3 million pay bill is £15,000, which is fully removed by the £15,000 Apprenticeship Levy allowance.

However, where the connection rules apply, a pay bill less than £3 million may attract a levy liability, depending on how the allowance is shared. This is because where an employer is connected to other employers by virtue of the connected companies or the connected charities rules, they can only have one annual allowance of £15,000 for all the connected companies or charities within their group.

The £15,000 Apprenticeship Levy allowance cannot be used to pay for apprenticeship training.

The Apprenticeship Levy is an annual charge, but employers report and pay it each tax month, as they do other PAYE liabilities. The monthly calculation of levy liability is based on the employer’s total pay bill for the tax month, which may include weekly as well as monthly pay runs.