Understanding the Apprenticeship Levy

What it is, how it works, and how to make the most of it

The Apprenticeship Levy was introduced by the UK government to boost workforce skills and fund apprenticeship training across all industries.

If your business (or group of connected companies or charities) has a combined annual pay bill of over £3 million, you’ll be contributing 0.5% of that total to the Levy. But it’s not just a tax—it’s a valuable opportunity to invest back into your people.

 

Who Has to Pay the Levy?

You’re required to pay the Apprenticeship Levy if:

• Your annual pay bill is more than £3 million
• You’re part of a group of businesses or charities whose combined pay bill exceeds that threshold

Payments are made monthly and reported through your Employment Payment Summary (EPS).

 

How It Works

The basics:

• You get a £15,000 annual allowance to reduce what you owe
• Levy funds are added to a digital apprenticeship service account
• You can spend this money on apprenticeship training and assessment
• If you don’t use it within 24 months, the funds expire

 

What You Can Use Levy Funds For

Once those funds are in your digital account, they can be used to:

• Take on new apprentices at any level
• Upskill existing staff with structured, accredited training
• Work with approved training providers who deliver high-quality, government-backed programmes

This isn’t just about junior recruits. Apprenticeships now cover everything from digital marketing and construction to senior leadership.

 

Getting More from Your Levy Investment

Many organisations let Levy funds go to waste. Here’s how to make yours work harder:

Plan ahead – Use your Levy strategically, aligned with business goals and workforce planning.
Collaborate – Share unused funds with smaller employers through Levy transfers (up to 25% of your annual pot).
Stay current – Keep an eye on changes to eligibility rules and funding guidance to avoid compliance issues.

 

What Are Levy Transfers?

If you don’t need to use all your funds, you can transfer up to 25% of your annual Levy pot to another employer. That could be:

• A supplier or partner in your sector
• A local charity or social enterprise
• Any employer with a genuine apprenticeship need

It’s a great way to make a social impact, support your wider network, and avoid seeing your unused funds disappear.

 

How to Transfer Funds

It’s a straightforward process:

1. Choose a recipient – Either directly or through the Apprenticeship Service
2. Agree the details – Pick the apprenticeship, training provider, and cost together
3. Transfer funds through the digital account – Set it up in the Apprenticeship Service
4. Funds are paid monthly – They go straight to the training provider, just like for your own apprentices

 

A Few Rules to Know

• You can only use Levy transfers for apprenticeship training and assessment
• Transfers can’t be used to cover wages, recruitment, travel or any other business costs
• If the apprenticeship ends early, the remaining funds go back to the sender
• Both you and the receiving employer must meet all eligibility and compliance criteria

 

Why Transfer Funds?

• Help smaller businesses build skills they couldn’t otherwise afford
• Support causes or sectors that matter to your business
• Strengthen partnerships across your supply chain or local economy
• Avoid losing money through fund expiry
• Improve your ESG/CSR profile in a meaningful way

 

Who Can Receive a Levy Transfer?

To receive a Levy transfer, the employer must:

• Be a legal employer in England
• Use the funds for an approved apprenticeship standard from the Institute for Apprenticeships
• Be registered on the Digital Apprenticeship Service (DAS)
• Work with a provider listed on the Register of Apprenticeship Training Providers (RoATP)
• Keep within the maximum funding band for their chosen programme
• Follow all employer responsibilities, including:
  • Offering a genuine job
  • Paying at least the apprentice minimum wage
  • Allowing off-the-job training (minimum 6 hours per week)
  • Supporting the apprentice through the full programme

Funds can’t be used for things like wages, recruitment costs, or capital expenditure.

 

What Counts as an Approved Apprenticeship Standard?

Approved standards are official training programmes designed by employers and industry experts. Each one outlines what an apprentice needs to learn to be fully competent in a specific job role—whether that’s an IT technician, a civil engineer, or a marketing executive.

They include:

• On-the-job and off-the-job learning
• Structured assessments (called End-Point Assessments)
• Clear outcomes in terms of skills, knowledge, and behaviours

Apprenticeships are available at a wide range of levels—from GCSE equivalent (Level 2) right up to Master’s level (Level 7)—and typically last 1 to 5 years.

You can browse over 1,500 standards across sectors including:

• Digital
• Construction
• Health and science
• Finance and legal
• Creative and design
• Engineering and manufacturing

Find the full list on the Institute for Apprenticeships website. 

 

Final Thought

If you’re paying into the Levy, make it count. Whether you use the funds internally, support another employer through a transfer, or simply want to explore what’s possible—knowing the rules and using the right support makes all the difference.

And if you’re not sure where to start, we’re happy to help.