The Apprenticeship Levy

The introduction of the new Apprenticeship Levy in April 2017 has changed the way Apprenticeships are funded and how businesses like yours will work with training providers like us.

It’s worth thinking about how these changes will affect your business, and how you’re going to respond.

In July 2015 the Government announced the introduction of an Apprenticeship Levy, which businesses started paying in April 2017.

The levy is designed to encourage employers to embrace apprenticeships as a way of meeting their current and future skills needs. It will fund the government’s ambition to support 3 million high-quality apprenticeships over the life of the current Parliament.

All employers in the UK with a payroll bill greater than £3m per year will have to pay the Levy.

The Levy will apply to employers in all sectors – including those already covered by statutory Levy arrangements (e.g. construction and engineering construction).

If you already pay a Levy, your Industry Training Board (ITB) will consult you on potential changes to your existing Levy arrangements.

The apprenticeship Levy is charged at 0.5% of payroll and the government will top this up with 10%

All employers will receive an allowance of £15,000 to offset against payment of the Levy. So only employers with payroll bills greater than £3m will have to pay the Levy.

There will be a ‘connected persons’ rule, so if you operate multiple companies or payrolls, you will only be able to claim one allowance. you will be able to choose how to divide the allowance between the different connected companies.

For the purposes of the Levy, payroll will include all wages, bonuses, commissions and pension contributions on which NICs are due. In technical terms, payroll means the total earnings upon which Class 1 secondary NICs are paid. It will not include other payments such as benefits in kind.

The Levy is collected monthly through Pay As You Earn (PAYE) alongside Income Tax and National Insurance.

Your £15,000 Levy allowance will be translated into a monthly allowance of £1,250. If your Levy liability in a given month is less than £1,250, you won’t have to make a Levy payment that month. Any unused allowance will be carried forward into the following month(s) until you’ve used it.

If the reverse is true, and you find that you have made Levy payments, but not used all of your allowances you will be given a credit that you can offset against other PAYE liabilities.

At the end of the tax year, HRMC will operate a rebate system to make sure that you pay the right amount of Levy.

You will be able to manage your Levy through an account with the new Digital Apprenticeship Service. Once it’s up and running, the Digital Apprenticeship Service will enable you to:

  • See Levy funds you have available and spend with a registered training provider in England
  • Select Apprenticeship frameworks and/or standards you want to use
  • Confirm the training provider(s) you want to use to deliver your apprentices’ training
  • Confirm the price you’ve agreed with your training provider
  • Pay for Apprenticeship training and assessment
  • Choose an assessment organisation
  • Post live Apprenticeship vacancies.

If you have not already registered with the Digital Apprenticeship Service, we recommend you do so as soon as possible.

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