What is the Apprenticeship Levy?

The apprenticeship levy has been introduced by the Government in order to fund apprenticeships in England for employers with a wage bill of over £3 million. The Levy comes into force from the 6th of April 2017. The levy in-effect changes the way apprenticeships are funded whether an employer pays the Levy or not. 

Key Facts

The apprenticeship levy comes to force in April 2017, the Government’s objective of the levy is to give employers more control over where and how, money is spent on apprenticeships. 

  • Employers in the UK with a wage bill of more than £3m per annum will be charged a levy of 0.5% from 5 April 2017
  • ‘Employer’ for the purposes of the levy is a secondary contributor with liability to pay Class 1 secondary National Insurance Contributions (NICS) for their employees
  • HM Revenue and Customs (HMRC) will collect the levy through the Pay as you Earn (PAYE) process
  • A £15,000 allowance for businesses paying into the levy, to offset against any levy payment
  • Top-up by the government to provide further offsets in the form of monthly top-ups. For every £1 paid into training an apprentice, the government will top-up 10% taking it to £1.10 in value
  • All businesses with a wage bill above £3m p.a., regardless of whether they use the funding available for apprenticeships are liable to pay the apprenticeship levy
  • The funds available via the levy scheme will only apply to English apprenticeships, although the levy is calculated on an employer’s full UK wage bill
  • Employers can register for the digital account from January 2017
  • Levy and apprenticeship standards will be overseen by a new body, The Institute of Apprenticeships.

Frequently Asked Questions

Who is liable for the Apprenticeship Levy?

All employers with a wage bill of over £3 million will be liable for apprenticeship levy from April 2017.

  • Employers with a pay bill of over £2.8 million in previous year with likely increase of pay bill above £3 million in current tax year should register for the levy scheme.
  • Employers with a pervious year pay bill of less than £2.8 million with no increase should register as and when they exceed £3 million.

What is the Apprenticeship Levy rate? How is it calculated?

The apprenticeship levy rate is currently 0.5% of the annual wage bill. Employers liable would also receive a £15,000 allowance to offset towards their annual apprenticeship levy. The allowance would work on a monthly basis.

Example 1
An employer who would pay the levy

Annual pay bill of £5,000,000:

Levy Sum:
0.5% x £5,000,000 = £25,000

Levy Allowance:
£25,000 - £15,000 - £10,000

Annual Levy Payable:
£10,000

Example 2
An employer who would not have to pay levy

Annual pay bill of £3,000,000:

Levy Sum:
0.5% x £3,000,000 = £15,000

Levy Allowance:
£10,000 - £15,000 = £0

Annual Levy Payable:
£0

How is the levy paid?

The levy is paid to HMRC through Pay As You Earn (PAYE).

What can employers spend the funds on?

The funds can be spent on apprentice training for new and existing employees.

How do employers use the funds?

The fund is accessible through the Digital Account, allowing Employers to pay providers directly from the digital account.

What are top-ups? How are they worked out?

The government will top-up 10% for every £1 paid into the levy to further offset on a monthly basis. Therefore, for every £1 the employer will get £1.10.

What is the Digital Account? How to access it?

Once levy is declared to HMRC, employers will be able to access funding for apprenticeships through a new digital apprenticeship service account, allowing employers to be able to:

  • select an apprenticeship framework or standard
  • choose the training provider or providers the employer wants training to be delivered through
  • choose the organisation that will assess you apprentices
  • post apprenticeship vacancies
  • set the price agreed with training provider
  • pay for apprenticeship training and assessment
  • stop or pause payments to providers

How do non-levy paying employers pay for apprentice training?

Those not liable to pay the levy will need to contribute 10% to apprenticeship training costs within the funding cap of the chosen standard, and the Government would co-invest the 90% cost.

What about apprentices that started pre-April 2017?

Apprentices that started before April 2017 would continue as per the old arrangement.

References

Further information about the apprenticeship levy can be found on the Government’s apprenticeship levy webpage.

Further details of the Government's vision of apprenticeships can be found here.


For further information or to discuss your requirements, contact Uxbridge College Employer Services on: 

01895 853786 | 01895 853780 
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