Apprenticeship Levy

What's the Apprenticeship Levy?

The Apprenticeship Levy is a UK Government employment tax that came into effect on 6 April 2017. It's collected across the whole of the UK. All employers (public, private and third sector) with a pay bill of more than £3 million each year will pay the levy.

SDS works with employers, including industry bodies, to provide support. We’ll keep updating this page with the latest information for employers.

Who has to pay it?

All UK employers with annual salary bills of more than £3 million now pay an apprenticeship levy.

If you're an employer in Scotland who already has apprenticeship programmes in your organisation, apprenticeship funding will continue to be administered by Skills Development Scotland. This will be done through contracted learning providers and direct employer contracts.

If you fund your own apprenticeships, you'll still have to pay the levy if you have a wage bill greater than £3million. You could review your skills needs and consider how your current training could be delivered through an approved apprenticeship to maximise their return on the levy.

If you do not have any apprenticeship programmes yet, read about our Foundation, Modern and Graduate Apprenticeship programmes. You'll find out how work-based learning can help your organisation's performance and productivity.

I pay a training levy already - do I have to pay this, too?

Yes, if you have a pay bill greater than £3million, as the Apprenticeship Levy applies to all employers.

There are two existing industry training boards which operate their own levies:

• the Construction Industry Training Board (CITB)

• the Engineering Construction Industry Training Board (ECITB)

Both bodies have consulted with their member companies on how the Apprenticeship Levy will interact with training levies. Check directly with them for more information.

How do employers benefit from the Apprenticeship Levy?

Skills Development Scotland makes a financial contribution to Modern Apprenticeships in Scotland. We do this by funding delivery through our network of contracted learning providers.

All employers – including levy-paying and non-levy-paying – who have apprentices and premises in Scotland can source apprenticeship training through these learning providers.

How is it calculated?

The levy is set at 0.5% of an employer’s annual wage bill and each employer will receive an allowance of £15,000 per year to offset against the levy. This means that although the levy applies to all employers, only employers with a wage bill over £3 million should pay it.

For example:

Employer A has 250 employees, each with a gross salary of £20,000. They would pay:

• pay bill: 250 x £20,000 = £5,000,000

• Levy sum: 0.5% x £5,000,000 = £25,000

• allowance: £25,000 - £15,000 = £10,000 annual levy payment

Employer B has 100 employees, each with a gross salary of £20,000. They would pay:

• pay bill: 100 x £20,000 = £2,000,000

• Levy sum: 0.5% x £2,000,000 = £10,000

• allowance: £10,000 - £15,000 = £0 annual levy payment

Employers who operate multiple payrolls will only be able to claim one allowance. You can use the Skills Funding Agency's indicative online tool for employers to:

• estimate your levy contribution

• begin your training requirements

• estimate your financial spending

Find further details on the calculation and payment of the apprenticeship levy on Gov.uk.

How will employers pay?

Each month, HM Revenue and Customs (HMRC) will collect the levy through Pay As You Earn (PAYE), payable alongside income tax and National Insurance. HM Treasury will allocate funding to the Scottish Government through the block grant.

For further details on the calculation and payment of the apprenticeship levy, read HMRC draft legislation.

Will employers who don’t have to pay the levy still get funding?

Yes, all employers can access funding for approved apprenticeships. Apprenticeships are an essential way for small and medium-sized enterprises (SMEs) to develop their employees and contribute to growth.

How is Skills Development Scotland involved?

Skills Development Scotland (SDS) has established an employer-led Scottish Apprenticeship Advisory Board (SAAB) to strengthen employer contribution to the development of apprenticeships in Scotland. This ensures they are aligned with industry and economic need, Fair Work and job opportunities.

Both SDS and SAAB continue to engage with the Scottish Government, employers and partners.

Tools and resources

The Scottish Government has published a Seven things you need to know about apprenticeships guide featuring the levy.

For information on paying the levy read HMRC's published guidance.

Get in touch

We can help you maximise apprenticeship opportunities for your organisation. For free support, contact our employer helpline on 0800 783 6000.