Employing a UK apprentice: pay, NI and cost

Taking on an apprentice is, in payroll terms, mostly a normal hire — but three things change: they can be paid a lower minimum wage, they usually save you employer's National Insurance, and (for large employers only) there's the Apprenticeship Levy. Here's what actually changes for 2026/27, and the paperwork that has to be right for the savings to apply.

The three things an apprentice changes in payroll

1. A lower minimum wage — the apprentice rate

Apprentices have their own National Minimum Wage rate, below the standard age-based rates. For 2026/27 it's £8.00 an hour. It applies to apprentices who are:

• aged under 19, or
• aged 19 or over and in the first year of their apprenticeship.

Once an apprentice is 19 or over and has completed the first year, they move onto the standard minimum wage for their age. The apprentice rate is a floor, not a cap — plenty of employers pay above it — but it's what the law allows you to pay.

2. An employer-NI saving — National Insurance category H

This is the one most employers miss. An apprentice under 25 on an approved apprenticeship goes onto NI category letter H, which means you pay 0% employer's (secondary) National Insurance on their earnings up to £50,270 a year (the same ceiling as the Upper Earnings Limit). Above that level the normal 15% applies, but very few apprentices earn near it — so in practice the employer NI on an apprentice under 25 is usually nil.

Two things to note: the apprentice still pays their own (primary) NI as normal — category H only removes your secondary contribution — and the saving stops the day they turn 25 or the apprenticeship ends, whichever comes first.

3. The Apprenticeship Levy — only if you're large

The Apprenticeship Levy is 0.5% of your total pay bill, but there's a £15,000 allowance, so it only bites once your annual UK pay bill exceeds £3 million. Almost every small business and overseas employer with a handful of UK staff pays nothing. Where it does apply, it's reported to HMRC through the Employer Payment Summary (EPS) each period.

A worked example: what category H is worth

Take an apprentice aged 22, in the second year of their apprenticeship, paid £22,000 for 2026/27. Compare the employer's NI on a standard code versus category H:

Illustrative. The apprentice's own pay and their primary NI are unchanged; category H only removes the employer's secondary NI, up to £50,270. Figures rounded.

When the saving ends

Category H isn't permanent. When the apprentice turns 25, or the apprenticeship completes (whichever is first), they move onto the standard category — usually A — from the following pay period, and employer NI applies as normal from that point. Getting this switch right, on time, is a common slip when apprenticeships are run in-house; a payroll provider tracks the birthday and the end date and changes the code automatically.

What about overseas employers?

If you're an overseas company running UK payroll — through a UK entity or a DPNI scheme — the payroll rules above are identical: apprentice minimum wage, category H under 25, levy only if your pay bill is very large. You employ a UK apprentice the same way you employ any UK worker.

One honest boundary, though: the funding and training side of an apprenticeship — accessing levy funding or government co-investment, and arranging training through an approved provider — is a separate system from payroll, with its own eligibility rules (including where the apprentice works), and it can get genuinely involved for an employer without a UK base. That's not something we run as part of payroll, and we won't pretend otherwise. What we do is make sure your apprentice is paid correctly and coded correctly, so you get the NI saving you're entitled to and stay compliant.

The bottom line

An apprentice is a cost-effective UK hire: a lower legal minimum wage, and — for anyone under 25 on an approved apprenticeship — usually no employer NI at all. The two things that unlock it are the right paperwork (an approved apprenticeship plus a written agreement) and the right payroll code (category H), switched back to standard at exactly the right time. Get those right and the saving is real and predictable.

General information, not tax or employment advice. Figures reflect 2026/27 UK rates as at July 2026 and are illustrative. Apprenticeship funding and training rules differ across England, Scotland, Wales and Northern Ireland. Confirm your position before relying on these numbers.