Apprenticeship Levy Explained

Our simple, succinct guide to what you need to know.

The government has introduced the Apprenticeship Levy. This has changed the way apprenticeships are organised and paid for. Employers with an annual payroll in excess of £3 million per year are now required to make a monthly contribution into their levy through HMRC. More detail about the Apprenticeship Levy and what it could mean for you is explained below.

Across all employment sectors

Employers across all employment sectors are required to pay the Apprenticeship Levy. Only employers with a pay bill in excess of £3 million are obligated to pay. This is estimated to be about 2% of businesses in England. The Levy is charged as a percentage of the yearly pay bill. If your business is affected, this is 0.5 % of your yearly pay bill. The Apprenticeship Levy is payable to the HM Revenue and Customs via the PAYE process.

Paying the Apprenticeship Levy

You receive a bill based on the wages subject to secondary National Insurance Contributions at Class 1. All wages count in calculating the bill, even those below the threshold. Wages include any money gained through employment. This also includes commission, bonuses, and pensions. At a glance, an employer paying annual wages of £5,000,000 pays an Apprenticeship Levy of £10,000. Your Apprenticeship Levy will be paid to HMRC.

Your Apprenticeship Levy allowance

Employers gain access to a Levy allowance which accumulates as the year progresses. The Apprenticeship Levy allowance is offset against your bill. This amount totals £15,000 every year.

How to access your funds

You can access funds for your apprenticeships by creating an apprenticeship account. This is the gateway for employers looking to fund apprenticeships and arrange training. The Digital Apprenticeship Service has been available since January 2017.

How to choose a provider

An approved training provider makes sure your apprentices get the training they need to do the job well. The Digital Apprenticeship Service delivers a list of approved training providers needed to help your apprentices to excel. Training must be approved in order for funds to be made available.

Spending funding

You can spend the funds in your digital account towards the cost of training and assessment for your apprentices. Only approved training and assessment providers are to be used when spending the funds in your digital account. The funds are only available to spend on training and assessment. They can’t be used for any other costs associated with work.