Apprenticeship Levy

Why was the levy introduced?

The levy was introduced to fund a step change in apprenticeship numbers and quality – delivering on the commitment that there will be three million additional apprenticeship starts by 2020. 

The rate of 0.5% was been set to deliver the increase in quality that business have been asking for while ensuring it does not place an unreasonable burden on employers. This puts the funding of high-quality apprenticeship training on a sustainable footing.

Unlike normal taxation, employers can get back the funds that are levied by investing in a sufficient amount of apprenticeship training. Employers choose the training provider they want to work with from an online register.

Many firms are concerned about the financial implications the levy has for their business. However, those who pay in and are committed to creating high quality training schemes within their organisation will benefit, and will be able to claim back more than they contribute.

The levy will apply to all employers with a UK PAYE in excess of £3 million per annum, irrespective of whether they employ apprentices or not.

Non levy-paying employers need to contribute towards the cost of training an apprentice. The government will pay 90% towards the cost of training, while employers will cover the remaining 10%. 

Businesses with fewer than 50 employees will not be required to pay anything when taking on a 16-18 year-old apprentice, as the government will fully cover the cost of training.

How does the levy impact your business?

Employers whose payroll totals over £3m are charged
the apprenticeship levy of 0.5% of their payroll.

The levy gives employers control of apprenticeship funding and encourages employers to increase the number of apprentices they employ, and invest in their training.

•The levy is based on total employee earnings subject to Class 1 secondary NICs
• The 0.5% levy is on your full UK payroll bill, not just the amount over £3m
• The levy is payable through Pay As You Earn (PAYE) alongside income tax and National Insurance
• Payment is taken monthly, in real time, meaning as your pay bill changes each month, the levy amount taken is reflected
• HMRC works closely with employers and providers of payroll services to minimise the burden of implementing these changes

The government will apply a 10% top-up to monthly funds meaning every £1 paid will be increased to £1.10 in value

The levy can be used to fund both new and existing employee development.

As the levy payment may not always be enough to fully cover the cost of apprenticeship training and assessment, the government will help employers meet 90% of the additional costs. Employers will need to make a 10% contribution to the additional cost of training.

What happens to the money once it is paid under the levy?

The money will is collected by HMRC. Individual employers’ funding for apprenticeship training in England will then be made available to them via the digital apprenticeship service.

Employers can use their levy funds to pay for training and
assessment for apprentices in England. The service also supports employers to identify a training course and find a candidate.

Scotland, Wales and Northern Ireland have their own, separate arrangements because skills and apprenticeships are a devolved responsibility.

How do employers access their funds?

Employers access their funds through their digital apprenticeship service account.  If there are
unused levy funds in an employer’s account after 24 months, the funds will go back into the national pot.

Government Support

There are two types of employers who benefit from government support towards the cost of their apprenticeships training:

1. Employers who haven’t paid the levy and want to purchase apprenticeship training from a provider
2. A levy-paying employer with insufficient funds in their digital account to pay for the cost of training and assessment they want to purchase
• The government will pay 90% of the costs of training and assessment.
• The employer will be responsible for paying 10% of the costs.

Contact Us

Want to know more about the levy and how to maximise the benefits for your business?  Get in touch!