The Apprenticeship Levy Explained

Posted by Liam McNally |   12th April 2017

The Apprenticeship Levy Explained

What is the apprenticeship levy?

On 6 April 2017, the way the government funds apprenticeships in England changed with the introduction of the apprenticeship levy. The levy will require all English employers with an annual pay bill of over £3 million to contribute 0.5% of their payroll costs, minus a £15,000 government allowance, towards apprenticeship training.

In most cases, the resulting pot of money will be topped up by the government to the tune of an extra 10%. Control of the apprenticeship funding will then be placed in the hands of employers through a new online scheme called the Digital Apprenticeship Service (DAS). This will become available from 1 May 2017.

Note that the levy won’t affect how businesses fund training for apprentices who started an apprenticeship programme before 1 May 2017. Funding for training these apprentices should continue under the terms and conditions in place at the time the apprenticeship started.

Will I have to pay the levy and if so, how much will it cost?

As noted above, this depends on the size of your annual payroll bill.

Example 1: an employer who would pay the levy

An employer with an annual pay bill of £5 million:

Levy sum: 0.5% x £5,000,000 = £25,000
Allowance: £25,000 – £15,000 = £10,000 annual levy payment
If the employer is eligible for a 10% government top-up, they’d then have £11,000 to spend on apprenticeship training.

Example 2: an employer who would not pay the levy

An employer with an annual pay bill of £2 million:

Levy sum: 0.5% x £2,000,000 = £10,000
Allowance: £10,000 – £15,000 = £0 annual payment
Levy payments for connected companies

Companies who are connected to other companies or charities for Employment Allowance and who have a combined annual pay bill of over £3 million will only be eligible for one £15,000 allowance. They must decide how the allowance will be shared between them at the start of the tax year.

This rule means that if a company not paying the levy becomes connected to a company that does pay the levy during the tax year, the first company would immediately become liable to pay the levy on their full payroll bill.

Connected companies can pool their levy funds to pay for apprenticeship training, so the money can be used where it’s most needed.

How will my business benefit from the levy?

The apprenticeship levy holds the key to increasing the number of apprenticeships available within the workplace. In turn, this will help employers to fill current and future skills gaps and broaden existing expertise within their organisations, paving the way for continued growth and success.

By partnering with specialist training providers, such as Intraining, companies can identify their skills and talent requirements, and recruit accordingly. Through structured apprenticeship and school leaver programmes, employers can attract the right talent into their businesses to meet their individual needs and objectives.

Levy funding can also be used to offer degree-level or higher professional apprenticeships to existing team members. As well as benefiting your business operations, investing in training your staff will also increase loyalty, engagement and retention levels. This is an important point to bear in mind, as research shows that young workers are increasingly attracted to companies offering quality training and development opportunities when considering potential job offers.

Crucially, apprenticeships schemes also offer a viable alternative to traditional academic routes for school leavers eager to break into their chosen work sector. For various reasons – not least the amount of debt likely to be incurred – university isn’t for everyone these days. More and more young people are turning to apprenticeships to get them onto a career ladder where they can ‘earn while they learn’.

By championing a high standard of skills and training within the workplace, the increase in apprenticeships enabled by the levy has the potential to revolutionise our future workforce. And because the levy will hand control over to employers, companies will be able to tailor their apprenticeship training requirements to meet both their own needs and those of their target employee base.

Paying and spending the apprenticeship levy

Once a business has calculated its annual levy payment amount, this will be collected monthly by HMRC through PAYE. When the monies have been topped up by the government (if applicable), the funds will then become available through DAS, which employers will access through an online account.

DAS will display information about approved apprenticeship training programmes, registered training providers and available candidates for employers to choose from. The levy can also be used to fund training for existing staff, as long as they meet the apprentice eligibility criteria. Here at Intraining, we have a wide variety of training and apprenticeship solutions that are suitable for current employees.

The employer uses DAS to find out how much funding is available for each apprentice, which can then be accessed in the form of vouchers. From the end of May 2017, the vouchers can be used to pay for the relevant training from a registered training provider.

Once an apprenticeship has been set up, DAS will deduct voucher payments every month from the employer’s account to spread the cost training over the lifetime of the apprenticeship.

How Intraining can help your business?

Here at Intraining, we help our clients to attract and retain talent, professionalise their workforce and migrate their existing learning and development activities over to apprenticeship programmes which meet their current and future skills requirements.

Our ‘managed service’ approach to apprenticeships enables our clients to maximise the potential they can release from publicly-funded programmes as well as the apprenticeship levy. In short, we do all we can to make it as simple as possible for your business to take on an apprentice. Our dedicated team are ready and waiting to guide you through every step of the process.

If you’d like to speak to me about apprenticeship opportunities for your business, please get in touch today at, or call me on 07824 327 399