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Apprenticeship Levy

2nd March 2017

Apprenticeship Levy

The Apprenticeship Levy is being introduced from 6 April 2017 and will be payable by large employers. The Levy will be 0.5% of the employer's pay bill, which is explained later in this article, but there is an annual allowance of £15,000.The allowance will be given on a pro-rata basis throughout the tax year.

The recent HMRC guidance confirms employers will need to report their Apprenticeship Levy liability each month. From the start of the tax year if:

  • Their annual pay bill (including any connected companies or charities) in the previous tax year was more than £3 million;
  • They believe their annual pay bill (including any connected companies or charities*) for the tax year will be more than £3 million.

If an employer's annual pay bill (including any connected companies or charities) unexpectedly increases to more than £3 million. In which case the employer will need to start reporting when this happens.

An employer's annual pay bill is all payments to employees that are subject to employer Class 1 secondary NICs. Broadly wages but excluding benefits and expenses. HMRC have confirmed that employers must include payments to employees for whom there are no employer NICs including:

  • All employees earning below the NIC lower earnings and secondary thresholds;
  • Employees under the age of 21;
  • Apprentices under the age of 25.

The Apprenticeship Levy will need to be reported each month on the Employer Payment Summary (known as the EPS) and should include the following:

  • The amount of the annual Apprenticeship Levy allowance which has been allocated to that PAYE scheme;
  • The amount of Apprenticeship Levy you owe to date in the current tax year.

HMRC have confirmed that it is not necessary to report Apprenticeship Levy if the employer has not had to pay it in the current tax year.

*A ‘connected company’ (a result of a merger or acquisition of another company for example) is when a company has control of another company, or both companies are under the control of the same person or persons. For example companies linked in a group – these companies are connected.

*A ‘connected charity’ for example, is when the purposes and activities of two or more charities are the same or substantially similar and they are controlled by the same or connected persons. If a charity controls a company which is not a charity, that company is treated as if it were a charity and the two are connected with each other for the purpose of the Employment Allowance. A charitable trust is connected with another charitable trust if at least half the trustees of one charity are trustees of the other charity or are connected with persons who are trustees of that other charity.

 Gov.uk apprenticeship levy



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