Apprenticeship Levy Explained for Employers (UK): How It Works and How to Use It

The apprenticeship levy is one of those topics that can feel like it only applies to large businesses. In reality, it's relevant to employers of all sizes — and whether you pay into it directly or not, there is government funding available to support apprenticeship training in your organisation. This guide explains clearly how it works and what your options are.

What Is the Apprenticeship Levy in the UK?

The apprenticeship levy is a government scheme that funds apprenticeship training across the UK. It was introduced in 2017 with the aim of making structured training more accessible for employers of all sizes.

One thing many employers aren't aware of is that you don't need to be a large organisation to benefit. Whether you have 10 employees or 10,000, there is funding available to help you develop your people through apprenticeships.

How that funding works does depend on the size of your pay bill, so it's worth understanding which category applies to you.

Who Pays the Levy?

Employers with an annual wage bill of over £3 million pay into the levy directly.

The rate is 0.5% of your total pay bill, minus a £15,000 annual allowance. So in practice:

• Pay bill of £3m: 0.5% = £15,000 − £15,000 allowance = £0 to pay

• Pay bill of £5m: 0.5% = £25,000 − £15,000 = £10,000 levy

• Pay bill of £10m: 0.5% = £50,000 − £15,000 = £35,000 levy

Payments are collected monthly through PAYE, alongside your normal tax and NI contributions.

If your pay bill is under £3 million, you don't pay the levy but, you can still access apprenticeship funding. More on that below.

Where Does Your Apprenticeship Levy Money Go?

Your levy contributions go into a digital account called the Apprenticeship Service (sometimes referred to as DAS — the Digital Apprenticeship Service).

You access this account through the government's apprenticeship service portal. Once you're set up, your funds appear there each month — ready to be spent on apprenticeship training with an approved provider.

It's worth knowing that funds currently expire after 24 months if unused. Simply put: if you don't use it, you lose it. That's money you've already contributed through payroll, sitting unclaimed.

Important update: From August 2026, the expiry window is set to reduce from 24 months to 12 months. This makes it more important than ever to have a clear plan for how you're using your levy pot. Read our full guide to the latest apprenticeship funding changes →

What Can You Spend It On?

Levy funds can only be used for apprenticeship training and end-point assessment with an approved training provider.

You can use them to:

• Train new employees joining as apprentices

• Upskill existing employees at any level, including managers, team leaders and specialists

• Support development across multiple departments or sites

You cannot use levy funds for wages, travel, equipment, or any costs outside the training itself.

Many employers are surprised to learn that apprenticeships aren't just for school leavers. They can be a powerful and a fully funded way to develop your existing workforce.

What If You Don't Pay the Levy but you still want to use an apprenticeship to support your workforce?

If your annual pay bill is under £3 million, you don't pay into the levy directly but, that doesn't mean apprenticeship funding isn't available to you.

The government operates a co-investment model for smaller employers. You contribute 5% of the training cost, and the government funds the remaining 95%. For most smaller businesses, that makes apprenticeship training a realistic and cost-effective option.

If you training someone aged 16–18, the government covers 100% of the training cost, with no contribution required from you.

There's also the option of a levy transfer, where a larger employer passes unused levy funds to a business — often a supplier or partner. It's worth exploring whether any organisations you work with would be willing to do this.

As a provider that works with many large employers across the UK, Workpays can help facilitate access to levy transfer funding — get in touch to find out more →.

Find out more about funding for non-levy employers →

The Government Top-Up

One detail that often goes unnoticed: the government adds a 10% top-up to every pound that enters your apprenticeship service account.

So for every £100 you contribute through the levy, you have £110 available to spend on training. It's a relatively small uplift, but it's a useful reminder that the funds in your account are worth using — particularly given they expire after 24 months if unspent.

How to Start Using Your Levy Funds

Setting up your apprenticeship service account is a five-step process, and the same steps apply whether you're a levy or non-levy employer.

1.      Log in to GOV.UK One Login at gov.uk/using-your-gov-uk-one-login and search for 'Manage Apprenticeships'

2.      Register as a user by confirming your name and details

3.      Add your PAYE scheme — levy employers use Government Gateway; non-levy employers can use Government Gateway or their AORN and EPRN (found on any HMRC correspondence)

4.      Set your account name and accept the ESFA Employer Agreement — you'll need authority to sign on behalf of your organisation

5.      Add Workpays as your training provider using our UKPRN 10037289 — you can also grant us permissions to manage tasks on your behalf, such as advertising vacancies and reserving funding

Once your account is live, we'd recommend adding at least one other team member with full access. If you have any questions, feel free to reach out to our team — we're happy to help →.

Common Misconceptions About the Levy

At first glance, the levy can seem like a tax that disappears into a government pot. In reality, it's money set aside specifically for your business to use on training.

Here are a few misconceptions worth clearing up:

"We pay the levy but don't use it, so it's just a cost."This is the most common one. If you're paying the levy and not drawing it down, you are leaving training budget on the table — budget that expires after 24 months.

"Apprenticeships are just for young people or entry-level roles."Not at all. There are apprenticeship standards at Level 3, 4, 5,6,7 — covering everything from finance, project management, and more.

"We'd have to hire new staff to use the levy."You can use levy funds to upskill your existing employees. Many businesses use apprenticeships as a structured way to develop their current teams without needing to recruit.

"It's complicated to set up."It does require some administration, but as an experienced provider, Workpays makes the process as smooth as possible — so you can focus on what matters most: developing your people. Once everything is in place, the ongoing process is straightforward.

Making the Most of Your Apprenticeship Levy

The employers who get the most value from the levy tend to approach it strategically — rather than reactively.

That means thinking about:

• Which roles or skill gaps in your business could be addressed through a funded apprenticeship

• Whether your management pipeline could benefit from leadership development programmes

• How apprenticeships might support your wider workforce planning and retention goals

The levy works best when it's built into how you think about L&D — not just used as an afterthought when a new starter joins.

Explore apprenticeship programmes for employers →

How Workpays Can Help

At Workpays, we work with employers to help them understand their funding options, identify the right apprenticeship standards for their teams, and navigate the apprenticeship service with confidence.

Whether you're a levy-paying employer looking to make better use of your account, or a smaller business exploring co-investment funding for the first time, we're happy to talk through your options.

Book a funding call with the Workpays team →

Key Takeaways

• The apprenticeship levy applies to employers with a pay bill over £3 million, at 0.5% of payroll minus a £15,000 allowance

• Funds sit in a digital account and must be used within 24 months or they expire

• The government adds a 10% top-up to every pound you contribute

• Levy funds can be used for new hires or existing employees

• Non-levy employers can still access co-funded apprenticeship training (government pays 95%)

• Levy transfers allow larger employers to share unused funds with smaller businesses