The Apprenticeship Levy
As part of the government’s commitment to create three million new apprenticeships by 2020, the apprenticeship levy was introduced on 6th April 2017.
Employers in the UK with a wage bill of £3 million or more will be taxed 0.5% of their wage bill above the £3 million. Funds will be collected through Pay as You Earn (PAYE).
Only 2% of all UK employers fall into this category.
There are no exceptions to the apprenticeship levy, if your pay bill is more than £3 million per year, the levy will be automatically deducted from your wage bill.
Read more about how the apprenticeship levy will work below:
A £3 million pay bill may seem huge, but it is the equivalent of having 150 staff paid £20,000 per year. You can use this tool to estimate the amount of apprenticeship funds your levy will provide: Estimate my levy funds
The government have committed to assist levy payers with apprenticeship funding. Once levy payments have begun, the government will pay a top up of 10% on all levy funds.
Any employer that recruits a 16 to 18 year old apprentice (or a 19 to 24 year old care leaver, or 19 to 24 year old with a Local Authority Education, Health and Care plan) will receive an incentive payment of £1000.
This applies to levy payers and non levy payers.
Small employers (less than 50 employees) who are not levy payers, are exempt from paying for apprenticeship training where the apprentice is aged 16 to 18 (or a 19 to 24 year old care leaver or 19 to 24 year old with a Local Authority Education, Health and Care plan). Non levy payers that have over 50 employees will be required to make a 10% contribution to the training costs.
Employers no longer have to pay National Insurance (NI) contributions for apprentices aged under 25. This can lead to significant savings for employers, particularly if you employ larger numbers of young apprentices.
The apprenticeship levy also provides non levy payers with the opportunity to fund apprenticeships.
There are no compulsory payments into a levy fund. Instead, non levy payers will be required to fund 10% of the cost of their apprenticeship training. The government will cover the remaining 90% of training costs.
The process of using levy funds to pay for apprenticeships will be managed online through the Digital Apprenticeship Service in England.
In order to set up an account, employers need to have their Government Gateway login details for the PAYE schemes they want to include in the account, as well as details of organisations such as Intraining, that they will make agreements with for apprenticeship training.
The service allows employers to manage the financial side of the apprenticeship system, estimate spend and recruit apprentices through their chosen training provider.
Registration for DAS is now open.
The apprenticeship levy will apply to employers across the UK, but only employers in England will receive funding through their digital account to pay for apprentice training.
The digital apprenticeship service will not apply in Scotland, Wales and Northern Ireland but £0.5 billion from the levy will be allocated to governments in these areas. The governments in these countries will decide how the funds are distributed.
The apprenticeship levy can only be used to fund apprenticeships from training providers, such as Intraining, that have been approved to deliver apprenticeships.
Levy funds cannot be spent on apprentice wages, travel, sustenance or professional qualifications not delivered through an apprenticeship.