The apprenticeship levy: how it works in 2026/27

The apprenticeship levy is a tax of 0.5% on an employer's annual pay bill, paid through PAYE. Every employer gets a £15,000 allowance against it, so only employers with a pay bill over £3 million pay anything. The money goes into an online account that the employer can spend on apprenticeship training and assessment in England. Employers who don't pay the levy get government funding instead.

The rules for spending levy funds changed on 1 August 2026. This page sets out how the levy works now, what changed, and what it means for law firms.

How the levy is calculated

You pay 0.5% of your total pay bill for the year, minus the £15,000 allowance. The pay bill is the earnings that employer Class 1 National Insurance is charged on, for all employees, before any thresholds. If you have connected companies, they share a single £15,000 allowance.

Here is an example. A firm with an annual pay bill of £5 million pays:

You report and pay it to HMRC each month with your PAYE, and the allowance builds up through the year at £1,250 a month.

The funds that reach your apprenticeship service account are your monthly levy multiplied by the share of your pay bill paid to people who live in England. A firm with offices in Cardiff or Edinburgh will see less in its account than it paid. Funds arrive shortly after the 22nd of each month.

What changed on 1 August 2026

For apprenticeships starting on or after 1 August 2026, and for levy funds entering accounts from that date:

• Levy funds now expire after 12 months instead of 24. Funds that were already in your account before August 2026 keep the 24-month expiry. Your account spends the oldest funds first.
• The government no longer adds a 10% top-up to new levy funds.
• If you run out of funds, apprentices aged 16 to 24 at the start are fully funded by the government. Before August this only applied up to 21, and only for non-levy employers.
• If you run out of funds, you pay 25% of the cost for apprentices aged 25 or over, and the government pays 75%. This was 5% for starts before August.
• Employers who don't pay the levy pay nothing for apprentices aged 16 to 24, and 5% for apprentices aged 25 or over.

Two other dates matter:

• Since 1 January 2026, Level 7 apprenticeships are only funded for apprentices aged 16 to 21 at the start, or 22 to 24 with an education, health and care (EHC) plan or care-leaver status. This applies to levy funds too.
• From 1 October 2026, non-levy employers can receive a £2,000 hiring payment for a new apprentice aged 16 to 24.

The shorter expiry affects firms that save funds for a large intake. A firm that used to let funds build up for an intake every second year will now lose anything it doesn't spend within 12 months.

Spending your levy funds

You can spend levy funds on training and assessment for apprentices you employ, with a training provider on the government's register. The funding band for each apprenticeship caps how much you can spend on one apprentice. Bands run from £1,500 to £27,000. If the price you agree with the provider is above the band, you pay the difference from your own budget.

You can't use levy funds for apprentices' wages, travel, equipment or recruitment.

The money leaves your account in monthly instalments over the length of the apprenticeship, with 20% held back until the apprentice completes. That means one apprenticeship draws on several months of levy, which helps keep funds from expiring.

When the funds run out

If your account doesn't have enough to cover a month's payments, the account pays what it can and the rest is co-funded:

All of this is up to the funding band maximum.

Transferring levy funds

You can transfer up to 50% of the levy you declared in the previous tax year to other employers. They use it to pay for their own apprentices' training. The allowance is set each April and any unused part doesn't carry over to the next year.

Transfers are useful when you expect to have funds left over. They let a larger firm support apprentices at smaller firms it works with, such as firms it refers work to, or local practices in its region. You agree the transfer in the apprenticeship service and the receiving employer's apprentices are paid for first from your account.

If you don't pay the levy

If your pay bill is £3 million or less, you don't pay the levy and you don't need levy funds. You still set up an apprenticeship service account, and the government co-funds each apprenticeship directly:

You may also get:

• a £2,000 hiring payment for a new apprentice aged 16 to 24 who hasn't worked for you for more than 90 days before their training starts (from 1 October 2026)
• a £1,000 payment for an apprentice aged 16 to 18, or 19 to 24 with an EHC plan or care-leaver status

Both are paid through your training provider in two instalments.

The apprenticeship levy for law firms

Only firms with a pay bill over £3 million pay the levy, so many high street and smaller regional firms don't. Whichever group your firm is in, these routes into legal practice can be funded:

Watch the Level 7 age rule. A levy-paying firm can no longer use its levy for a graduate solicitor apprenticeship if the graduate is 22 or over, unless they have an EHC plan or care-leaver status. For those staff, the Chartered Legal Executive apprenticeship leads to a qualified lawyer role and is funded at any age. The Advanced Paralegal apprenticeship includes SQE1 preparation.

Apprenticeships can also be used for people you already employ, as long as the training covers skills they don't already have and they spend at least half their working time in England. For a levy payer, putting experienced paralegals and legal assistants through an apprenticeship is often the simplest way to use funds before they expire.

Work out your firm's figures

Our funding calculator shows what an apprenticeship would cost your firm by route and age. The employer cost sheet puts every route on one page.

If you'd like to talk it through, book a 15-minute call with a DataLaw apprenticeship adviser. We'll look at your levy balance, the staff you want to train, and which routes fit.

Frequently asked questions

Sources

• Apprenticeship funding rules 2026 to 2027, Department for Work and Pensions and Department for Education
• Apprenticeship technical funding guide from August 2026, gov.uk
• Pay Apprenticeship Levy, HMRC
• Transferring your apprenticeship levy to another business, gov.uk