How to calculate the apprenticeship levy

If you’re keen to introduce apprenticeships or additional training to your business, the apprenticeship levy provides a valuable opportunity to do so. The levy is an amount paid every month from businesses with an annual wage bill of more than £3 million. The funds paid through the levy can then be offset against the cost of apprenticeship training.

You might be wondering exactly how you calculate your levy and how it is worked out. Your apprenticeship levy payment is 0.5% of your annual wage bill minus the government’s allowance of £15K. The funds that you receive into your digital account for spending on apprenticeships will equal your ‘levy payment’ plus the 10% top-up applied by the government.

Using the apprenticeship levy calculation formula

Your levy payment amount is calculated using this simple formula:


If your company has an annual wage bill of less than £3 million you will not have to pay the levy since a levy allowance for this wage bill bracket would be less than the £15,000 offset amount. For example:

LEVY RATE (0.5) X £2,000,000 = £10,000

£10,000 – (OFFSET) £15,000 = No levy payment

Apprenticeship levy calculation examples

Based on real-life cases, we’ve included some apprenticeship levy calculation examples below using our levy calculation formula.

Calculating the levy for large employers

For a large employer with a payroll bill of £200,000,000 their levy total would be: £200,000,000 x 0.5% – £15,000 allowance = £985,000

Calculating the levy for small employers

For a smaller employer with a payroll bill of £18,000,000 their levy total would be: £18,000,000 x 0.5% – £15,000 allowance = £75,000

Don’t let your apprenticeship levy funds expire

It’s important to note that these funds expire (and default to the government) after 24 months, so it’s advisable to use them where you can. After all, the majority of these funds are made up of a tax your business has paid and set aside.

So What Happens If You Don’t Have Enough In Your Levy Pot And It Runs Out? What Do You Do?

This is called co-investment, and this occurs when a levy payer simply runs out of money in their digital account. The employer will then be able to use the model that applies to non-levy payers, meaning the employer will have to pay 5% of the remaining training costs to the training provider while the government will then pay the remaining 95%.