Apprenticeship Levy payments: calculate monthly and pay with PAYE

The Apprenticeship Levy is an annual charge calculated from the employer's pay bill, but employers report and pay it through the monthly PAYE process. In 2026 to 2027 the rate remains 0.5 percent and the annual levy allowance remains £15,000, which means a standalone employer generally starts paying once its annual pay bill exceeds £3 million.

The headline threshold is a £3 million annual pay bill

HMRC's 2026 to 2027 rates say employers and connected companies with a total annual pay bill above £3 million are liable to the Apprenticeship Levy. The pay bill broadly consists of earnings subject to employer Class 1 National Insurance, including some earnings charged at a zero employer NIC rate.

Do not test only cash salary above the secondary threshold. Payroll should use HMRC's pay-bill definition. Groups must also look at connected employers because the threshold and allowance can be affected by the combined structure.

The charge is 0.5 percent with a £15,000 annual allowance

HMRC confirms the levy rate is 0.5 percent of annual pay bill and the annual allowance is £15,000. Because 0.5 percent of £3 million equals £15,000, a standalone employer with exactly £3 million of pay bill normally has no net levy.

The calculation is cumulative through the tax year. Payroll software should calculate the year-to-date liability and allowance rather than treating each month as independent. Seasonal pay can therefore create levy in some months while unused allowance from earlier months carries forward.

Connected companies and charities share one £15,000 allowance

HMRC says connected companies or charities have one annual £15,000 allowance to share. The group decides how to allocate it between PAYE schemes at the start of the tax year, and the split generally cannot be changed later except to correct an input error.

This makes the banking number a group-tax calculation rather than a simple percentage at each subsidiary. Central payroll or tax teams should document the allocation so each entity knows how much levy its PAYE scheme will actually pay.

The liability is reported monthly through the Employer Payment Summary

HMRC's August 2026 levy manual says employers report the levy through the Employer Payment Summary. The calculation uses the cumulative pay bill and cumulative share of the levy allowance for the tax year to date.

Reconcile the EPS figure to payroll before the PAYE bank payment is released. If payroll data changes after an earlier month, later cumulative calculations can adjust. Finance should understand why the current PAYE liability moved rather than assuming every change came from wages or National Insurance.

The levy is paid at the same time as ordinary PAYE liabilities

GOV.UK says the Apprenticeship Levy is paid each month at the same time as PAYE tax and earnings-related National Insurance. Electronic employer PAYE is normally due by the 22nd after the tax month.

The bank transfer does not need a separate levy beneficiary. The levy is part of the employer's PAYE bill. Finance should therefore reconcile the total bank payment across PAYE tax, NIC, CIS where relevant and the levy rather than expecting a standalone levy debit.

The levy payment and the apprenticeship service account are related but not the same cash account

Paying levy to HMRC contributes to funds shown in the apprenticeship service, subject to current funding rules. The £15,000 levy allowance is a tax allowance used in calculating what the employer pays; it is not itself cash that can be spent as an extra training credit.

2026 apprenticeship funding rules are changing in areas such as funding contributions and expiry of account funds. Keep payroll-tax accounting separate from apprenticeship-training budgeting. One determines HMRC cash outflow; the other determines how training funds can be used.

Groups should maintain a written allowance allocation before the tax year begins. If Parent Ltd and three subsidiaries share the £15,000 allowance, payroll teams need to know which PAYE scheme receives which portion. The bank payment follows the reported liability, so an allocation error can make one entity overpay while another appears short.

Also reconcile the tax levy to the apprenticeship service account separately. The amount paid to HMRC and the balance available for training do not move on exactly the same conceptual basis, particularly as 2026 funding reforms affect expiry and government contributions. Treasury should not treat the digital training balance as cash recoverable from HMRC.