Set up Apprenticeship Levy

Employers are liable to pay for Apprenticeship Levy if they:

• Have an annual pay bill of over £3 million.
• Are connected to any companies or charities for Employment Allowance purposes and have a combined annual pay bill of more than £3 million.

  Note: The rules for connected companies are the same for Apprenticeship Levy and Employment Allowance.

Apprenticeship Levy must be reported and paid monthly through your Employee Payment Summary. However, companies can use the Apprenticeship Levy allowance, which reduces the Apprenticeship Levy liability by £15,000 per year.

For further guidance, see HMRC’s Pay Apprenticeship Levy.

Before you begin

Apprenticeship Levy is billed at 0.5% of your annual pay bill.

UK Payroll automatically calculates your pay bill each month, which includes all payments to employees that are subject to employer Class 1 secondary National Insurance contributions, such as wages, bonuses, and commissions. Any unused allowance can be carried forward into the next month within the same tax year.

If your calculation for the Apprenticeship Levy exceeds the £15,000 annual allowance, the Levy will be included in your Payroll Summary each month.

How to set up Apprenticeship Levy

1. From the left side bar, navigate to Settings.
2. Under the Company heading, select Allowances.
3. Click Enable to the right of Apprenticeship Levy.
4. Toggle on [your company] is liable to pay Apprenticeship Levy.
5. If you’re setting up the Levy part-way through a tax year, enter your year-to-date details in the Pay bill YTD and Levy due YTD fields.

   Note: Pay bill YTD refers to the value of your annual pay bill for the tax year so far. Levy due YTD refers to the value of the Levy you have paid for the tax year so far. If you’re unsure of the figures, check your P32 report or contact your previous payroll provider.

6. If you share the £15,000 Apprenticeship Levy allowance with other entities, toggle on [your company] shares allowance with other companies/charities. Enter the allocated allowance for your company.
7. Click Enable.

How to disable Apprenticeship Levy

1. From the left side bar, navigate to Settings.
2. Under the Company heading, select Allowances.
3. Click Stop to the right of Apprenticeship Levy.
4. Click Yes, stop claim.

FAQs

What is an example Apprenticeship Levy calculation?
The first month of the tax year - The Apprenticeship Levy allowance is divided by 12. This figure is then subtracted from 0.5% of your monthly pay bill.

Month 1 year-to-date pay bill: £260,000
Year-to-date Levy allowance: £15,000/12 = £1,250
Levy: £260,000 x 0.5% = £1,300
Levy due: £1,300 - £1,250 = £50

Following months - UK Payroll calculates your total year-to-date pay bill and your monthly Levy allowances for the year-to-date. The year-to-date Levy allowance is subtracted from 0.5% of your total year-to-date bill. Then, the amount of paid year-to-date Levy is subtracted.

Month 3 year-to-date pay bill: £780,000
Year-to-date Levy allowance: (£15,000/12) x 3 = £3,750
Levy: £3,900
Levy due: £3,900 - £3,750 = £150