Apprenticeship Levy

What is the apprenticeship levy and who pays it?

  • From 6th April 2017, some employers will be required to contribute 0.5% of their pay bill to a new apprenticeship levy.
  • The apprenticeship levy applies to all employers in any sector, with a pay bill of more than £3 million each year.
  • Levy allowance is not a cash payment and funds can be accessed via a new digital apprenticeship service.
  • Employers pay their levy to HMRC through the PAYE process and will start in April 2017.
  • The levy aims to encourage employers to engage with and embrace apprenticeships as a mechanism through which to support skills and talent development.

How much levy will I pay?

  • The levy has been set at 0.5% of payroll.
  • The levy takes into account the total of all employees’ earnings but there is a £15,000 allowance to offset against the levy.
  • Where an employer may operate multi payrolls, they will only be able to claim one allowance.
Levied Employer Non-Levied Employer

Employer of 250 employees, each with a gross salary of £20,000

Pay bill:

250 x £20,000 = £5,000,000

Levy sum:

0.5% x £5,000,000 = £25,000

Allowance:

£25,000 - £15,000 = £10,000 annual levy payment. With a levy payment of £10,000, an employer would have a levy pot that can fund around four apprentices.

Employer of 100 employees, each with a gross salary of £20,000

Pay bill:

100 x £20,000 = £2,000,000

Levy sum:

0.5% x £2,000,000 = £10,000

Allowance:

£10,000 - £15,000 = £0 annual levy payment.                                                       

 

Top-ups

  • The government will apply a 10% top-up to the funds you have for spending on apprenticeship training.
  • The top-up will be applied monthly at the same time the funds enter your account.
  • For every £1 that enters your digital account to spend on apprenticeship training, you get £1.10.

Employers that don’t pay the levy

  • If you do not pay the levy, you won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least 2018.
  • You will be asked to make a contribution to the cost of training and the government will pay the rest, up to the maximum amount of government funding available for that apprenticeship.
  • This will be paid directly to the training provider and you will be able to spread it over the life time of the apprenticeship.
  • As both you and the government make a payment, it is called ‘co-investment’.

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