Could employing an apprentice save your business tax?

The chancellor recently announced that the employer’s national insurance rate would increase to 15% for 2025/2026. This means that many businesses, including micro businesses with only one director on the payroll, are facing increased costs to pay salaries.

Many small businesses have been helped by the increased employment allowance to £10,500.

Sole-director/employee businesses are currently ineligible for the employment allowance, but they would become eligible if they employed their first team member.

One of the cheaper and most impactful ways to do this could be to employ a local apprentice.

The added benefit is often; you don’t have to pay employers national insurance on apprentices who are

• under 25 years old
• is on an approved UK government apprenticeship standard or framework (these can differ depending on UK country)
• earns less than £967 a week (£50,270 a year)

Therefore, larger businesses could also consider apprenticeships as a way to reduce their employer’s national insurance liabilities for 2025/2026.

If you have existing employees, you could consider using the apprenticeship scheme to improve the skills of your existing team. The secondary benefit is that if you meet the criteria, you might save on the employer’s national insurance simultaneously.

A bit of background about apprenticeships.

What is an apprenticeship?

An apprenticeship in the UK is a work-based training program that combines practical on-the-job experience with theoretical learning. Apprentices typically work for an employer while studying towards a recognized qualification.

Key features of apprenticeships include:

1. Duration: They usually last between one and four years, depending on the level and sector.
2. Levels: There are various levels, including intermediate (Level 2), advanced (Level 3), higher (Level 4 and above), and degree apprenticeships (Level 6 and 7).
3. Employment: Apprentices are paid employees, earning a wage while they train, which is often at least the national minimum wage for apprentices.
4. Training: Apprentices receive training from their employer and often attend a college or training provider for additional education.
5. Qualifications: Successful completion of an apprenticeship leads to qualifications like NVQs, BTECs, or even degrees, depending on the apprenticeship level.

Apprenticeships are available in various industries, from construction and engineering to healthcare and digital technology. They are designed to help individuals gain skills, knowledge, and experience while contributing to the workforce.

In the 2023/24 academic year, 130,830 apprenticeships started in the UK, a 7% increase from the previous year. This includes:

• Under 19s: 42,740 apprentices, or 32.7% of all starts
• Level 6 and 7: 22,980 apprentices, or 17.6% of all starts
• Advanced apprenticeships: 119,900 apprentices, or 43.0% of all starts
• Higher apprenticeships: 100,490 apprentices, or 36.1% of all starts

Employing an apprentice offers several benefits for businesses, including:

• Skill Development: Apprentices bring fresh perspectives and can be trained to meet specific company needs, ensuring they develop the skills that are most relevant.
• Increased Productivity: Apprentices can help alleviate workloads and contribute to projects, boosting overall team productivity.
• Cost-Effectiveness: Hiring apprentices can be more affordable than employing fully qualified staff. Additionally, government incentives may be available to offset much of training costs.
• Loyalty and Retention: Apprentices often develop a strong commitment to the company, leading to higher retention rates and reducing recruitment costs in the long term.
• Diversity and Innovation: Bringing in apprentices can promote a diverse workforce and encourage innovative ideas and approaches, as they often bring different viewpoints.
• Succession Planning: Investing in apprentices creates a talent pipeline, helping businesses prepare for future skill shortages and ensuring continuity in key roles.
• Enhanced Company Reputation: Supporting apprenticeships can improve a company’s reputation in the community and industry, demonstrating a commitment to workforce development.
• Compliance and Standards: Engaging in apprenticeships helps businesses meet industry standards and comply with regulations related to training and development.

Employing apprentices is a strategic investment that can yield significant returns for both the business and the apprentices themselves.

We have two apprentices over the two Switchfoot businesses, and we would be more than happy to discuss our experience.