Apprenticeships have become a cornerstone of the UK’s efforts to develop homegrown talent, tackle skills shortages, and drive productivity across all industries. Yet one question continues to puzzle employers of all sizes: how is apprenticeship training funded, and what support is available?
Whether you’re a large corporate organisation, a mid-sized business, or a small company looking to grow, this detailed guide will walk you through everything you need to know. We’ll demystify the Apprenticeship Levy, explain how government grants for apprenticeships work, and give you a complete “apprenticeship levy for dummies” explanation.
To make it even easier, we’ve included a video explainer [coming soon] to help you understand key concepts quickly. Watch the video or read on for the full breakdown.
Contents
- What is the Apprenticeship Levy?
- Why Was It Introduced?
- Who Pays the Apprenticeship Levy?
- How Much Will You Pay?
- Non-Levy Employers: What Support Can You Get?
- What Is a Levy Employer?
- What Can You Spend Levy Funds On?
- Government Apprenticeship Grants and Incentives
- Apprenticeship Funding in England vs Devolved Nations
- Apprenticeship Service Account (DAS) Explained
- Upskilling Current Staff Using the Levy
- Maximising the Benefits of the Apprenticeship Levy
- Frequently Asked Questions
- Conclusion
1. What Is the Apprenticeship Levy?
The Apprenticeship Levy is a UK government policy introduced in April 2017 to help fund apprenticeship training in England. It applies to large employers and is designed to make them invest in the skills and training of their workforce.
The levy is 0.5% of your annual payroll, and is collected monthly via PAYE. Once paid, the money becomes available in a digital account, which you can then use to pay for apprenticeship training with approved providers.
It’s not just a tax – it’s a ring-fenced training budget to grow your business.
2. Why Was It Introduced?
The UK government introduced the levy to increase the number, quality, and relevance of apprenticeships. Before 2017, the system relied heavily on government funding with less strategic input from employers.
The levy gives large employers direct control over their training investment and encourages all businesses to think strategically about workforce development.
It also contributes to achieving the government’s goal of creating high-quality apprenticeships that meet the needs of the economy.
3. Who Pays the Apprenticeship Levy?
You are required to pay the apprenticeship levy if:
- Your annual payroll exceeds £3 million
- You operate within the United Kingdom
- You are registered for PAYE
Even public sector organisations such as the NHS, local councils, and universities pay the levy if they meet the threshold.
4. How Much Will You Pay?
The levy is calculated at 0.5% of your total annual wage bill, minus a £15,000 allowance.
Example Calculation:
If your payroll is £5 million:
- 0.5% of £5 million = £25,000
- Subtract £15,000 allowance = £10,000 levy payment annually
Your monthly levy contributions are added to your Digital Apprenticeship Service (DAS) account, where they’re topped up by the government with an extra 10%.
So, £10,000 becomes £11,000 in spendable apprenticeship funding.
5. Non-Levy Employers: What Support Can You Get?
Smaller employers (those with a pay bill under £3 million) do not pay the levy, but can still benefit significantly from government funding.
You only need to contribute 5% of the cost of apprenticeship training, and the government will pay the other 95%.
For example:
- A £6,000 training programme = £300 paid by you, £5,700 from the government
For apprentices aged 16-18, or those with special educational needs, the government often covers 100% of training costs for small employers.
6. What Is a Levy Employer?
A levy employer is any organisation that meets or exceeds the £3 million annual payroll threshold and is required to pay into the apprenticeship levy scheme.
Benefits of being a levy employer include:
- Access to a dedicated digital fund for training
- Opportunity to customise training through approved apprenticeship standards
- Ability to transfer unused funds to other businesses
Understanding this classification is key to knowing how much control and funding support your business has.
7. What Can You Spend Levy Funds On?
Levy funds must be spent on apprenticeship training and end-point assessments (EPA). This includes:
- Off-the-job training
- Programme delivery by approved providers
- End-point assessments by registered organisations
You cannot spend levy funds on:
- Apprentice salaries or benefits
- Recruitment costs
- Travel or accommodation
- Tools or uniforms
- Training outside of apprenticeship standards
8. Government Apprenticeship Grants and Incentives
In addition to the main funding routes, the government also offers direct grants to encourage hiring apprentices:
£1,000 Employer Incentive
This is available to employers who take on:
- An apprentice aged 16 to 18, or
- An apprentice aged 19 to 24 with an Education, Health and Care Plan (EHCP)
The payment is made in two parts:
- £500 after 90 days of the apprenticeship
- £500 after 365 days
This £1,000 bonus is in addition to your levy or co-investment funds and is designed to support the extra pastoral care young or vulnerable learners may need.
9. Apprenticeship Funding in England vs Devolved Nations
While the levy is UK-wide, the way funds are allocated and managed differs across the four nations:
England
- Employers access funds via the Digital Apprenticeship Service (DAS)
- Use approved standards and training providers
- Government provides 10% top-up to levy contributions
Scotland, Wales and Northern Ireland
- Funds are redistributed through block grants
- Managed by respective devolved governments
- Different eligibility rules, priorities and funding caps
If your business operates across multiple UK nations, you’ll need to register separately and comply with different systems in each region.
10. Apprenticeship Service Account (DAS) Explained
The Digital Apprenticeship Service is a free online platform for employers to:
- Manage levy contributions
- Recruit apprentices
- Find training providers
- Monitor and approve training costs
- Track funding and expiry
Even non-levy employers must use DAS to reserve apprenticeship funding and approve training starts. If you haven’t done so yet, it’s worth registering today.
11. Upskilling Current Staff Using the Levy
You can use apprenticeship funding to train new or existing staff, as long as:
- The training is relevant and substantive
- It leads to a recognised apprenticeship standard
- It delivers new knowledge, skills, and behaviours
Popular examples of internal development:
- Existing staff completing Team Leader Level 3
- Aspiring managers joining the Operations Manager Level 5 programme
- Staff training in marketing, content creation or business analysis
It’s a cost-effective way to retain talent and support career progression internally.
12. Maximising the Benefits of the Apprenticeship Levy
Many levy-paying employers don’t spend all their funds, and they expire after 24 months. To make the most of what you’re paying for:
Top Tips:
- Forecast needs early – Plan for apprenticeship starts months in advance
- Use levy transfers – Share up to 25% of unused funds with smaller businesses or partners
- Review standards regularly – New apprenticeship standards are launched often
- Work closely with providers – Choose ones who offer support with onboarding and compliance
Remember, this is your money – not using it is the same as throwing it away.
13. Frequently Asked Questions
Can I use the levy to pay apprentice wages?
No. Levy funds can only be used for training and assessment costs, not wages or other employment-related expenses.
Do I lose funds if I don’t use them?
Yes. Unused levy contributions expire after 24 months on a rolling monthly basis.
What happens if the cost of training exceeds my levy balance?
You’ll need to top up the difference, or apply for co-investment (government pays 95%, you pay 5%).
Is training for existing staff covered?
Yes – provided it meets the apprenticeship standard criteria, lasts at least 12 months, and results in substantial learning.
Can I transfer my levy funds to another business?
Yes. You can transfer up to 25% of your annual levy to another employer, such as a supply chain partner or SME.
14. Conclusion: Make the Most of Apprenticeship Funding Today
Navigating the world of apprenticeship funding can seem daunting at first, especially with unfamiliar terms like “levy employer”, “DAS account”, and “co-investment”.
But once you break it down, it’s clear that apprenticeship funding is one of the best tools available for workforce development – no matter the size of your business.
Whether you pay the levy or not, there is generous government support available. From £1,000 incentives to 95%-100% training costs covered, there’s never been a better time to bring in fresh talent or upskill your team.
With your Digital Apprenticeship Service account, strategic planning, and the support of a quality training provider, you can unlock a powerful system designed to drive growth and build capability in your organisation.
Need a visual summary? Check out our quick video explainer, where we walk you through how the apprenticeship levy works, who qualifies for funding, and how to use your DAS account step by step.
Health and Social Care Apprenticeships
For more information, please visit these helpful sites:
Government Overview of the Apprenticeship Levy – Official GOV.UK guidance for employers paying the levy.
Apprenticeship Funding Rules (England) – The latest rules and updates for apprenticeship funding in England, published by the Department for Education (DfE).
Digital Apprenticeship Service (DAS) Login and Info – Employer guidance on how to use your digital account to manage apprenticeship funds
Institute for Apprenticeships and Technical Education (IfATE) – Lists all approved apprenticeship standards, training providers, and EPA organisations.
National Apprenticeship Service (Employer Hub) – Employer-facing site promoting apprenticeships, including benefits, case studies, and recruitment tools.
HMRC Guidance on Payroll and PAYE for Levy –
Explains how to calculate and report the levy through HMRC.
