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
250 x £20,000 = £5,000,000
0.5% x £5,000,000 = £25,000
£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
100 x £20,000 = £2,000,000
0.5% x £2,000,000 = £10,000
£10,000 - £15,000 = £0 annual levy payment.
- 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’.