All you need to know
What is the Apprenticeship Levy?
The Apprenticeship Levy is part of the government’s plan to increase the quantity and quality of Apprenticeships. The Levy is a new tax which aims to fund three million new Apprenticeships in England by 2020.
When did the Levy come into effect?
The Levy came into effect in April 2017. Employers included in the Levy should have had their first Levy payment taken then.
Do all organisations need to pay the Levy?
All UK employers who have a total employee pay bill above £3m a year will pay the Levy. This includes public and private sector, charities and educational providers such as academy groups and universities. The Levy rate was set at 0.5% of your pay bill in the November 2015 Comprehensive Spending Review.
Your ‘pay bill’ is your total employee earnings subject to Class 1 secondary NICs.
Employers get a £15,000 fixed annual allowance to offset against the Levy payment. Employers who operate multiple payrolls are able to claim one allowance for the Levy.
An example: if you have a £3m pay bill, you have a Levy bill of £15,000 (at 0.5% of employer pay bill). The allowance is offset against this so your Levy payment is £0.00.
How much of the Apprenticeship Levy do I pay?
Here are some examples of how much employers may pay for the Levy;
Employer A: 1,000 employees, each with a gross salary of £20,000
Annual pay bill: 1,000 x £20,000 = £20,000,000
Levy applied: 0.5% x £20,000,000 = £100,000
After allowance applied: £100,000-£15,000 means £85,000 Levy payment
Employer B: 500 employees, each with a gross salary of £20,000
Annual pay bill: 500 x £20,000 = £10,000,000
Levy applied: 0.5% x £10,000,000 = £50,000
After allowance applied: £50,000 – £15,000 means £35,000 Levy payment
Employer C: 100 employees, each with a gross salary of £20,000
Annual pay bill: 100 x £20,000 = £2,000,000
Levy applied: 0.5% x £2,000,000 = £10,000
After allowance applied: £10,000 – £15,000 means £0 Levy payment
How does the government collect the Levy?
Payments are collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), alongside tax and National Insurance.
What happens to the money once it’s paid?
The money is collected by HMRC and for apprenticeship training in England can be accessed via a new Digital Apprenticeship Service (DAS) account. You can use this to pay for apprentice training. On your DAS account you can see all the training providers you want to deliver the training, chose appropriate Apprenticeship training courses and find candidates for your programmes.
How do I draw down from the Levy fund?
In England, you need to register your details online with the apprenticeship service, along with the details of your apprentice. You can see how much can be drawn down for each apprentice in your account. You can then use these funds to spend on training with registered apprenticeship training organisations.
What are the funding bands and funding caps?
You are not be able to spend an unlimited amount of money on a single apprentice. There are currently 15 funding bands with caps which limit the amount of Levy funds you can spend on training for an individual apprentice. The cap varies according to the level and type of apprenticeship. For example, higher level training over a longer duration has a higher cap. Let us know if you require more information on this.
You can find out more information and how much employers will be able to spend on different apprenticeships in the Government’s latest funding pages.
What can the Levy be spent on?
You can spend your Levy funds on apprentice training for either existing staff or new recruits as long as the training meets an approved standard or framework and the individual meets the apprentice eligibility criteria.
What types of programmes can be funded by the Levy?
A range of apprenticeship training programmes can be funded. They must be provided to an approved apprenticeship standard.
What can apprenticeship funding be spent on?
Funds can only be used towards the costs of apprenticeship training. They cannot be used on other associated costs such as apprentice wages, travel and subsidiary costs or the costs of setting up an apprenticeship programme. You can find out further detail by reading the Government’s March 2017 update on apprenticeship funding rules.
How do I use funds from my digital account to buy training?
When an apprenticeship has started, monthly payments will be automatically taken from your digital account and sent to the training provider. This spreads the cost over the lifetime of the apprenticeship. You will see funds entering your digital account each month as you pay the Levy, and funds leaving the account regularly each month as you pay for training.
Do I have to use an external training provider or can we deliver the apprenticeship programme ourselves?
You can buy-in from a provider or deliver the training yourselves, but the training must be delivered by an approved provider. If you want to “DIY”, your organisation needs to register as an approved provider and will be subject to Education Skills Funding Agency (ESFA) quality arrangements and OFSTED inspection.
Can I direct my Levy funds to someone else?
In the first year of the Levy, you will only be able to pay for apprenticeship training of your own employees. However, the government understands some employers will want to support their supply chain or other employers in their sector or community by transferring funds. They have stated that they are committed to introducing this in 2018.
How do I get out more than I put in to the Levy?
Employers in England who pay the Levy will get a 10% top up to their digital accounts. This means every £1 will be increased to £1.10.
How long will my funds last?
Funds will expire 24 months after they enter your (DAS) account unless you spend them on apprenticeship training. Money is spent when it leaves your digital account as a payment to a training provider.
Under what circumstances will I have to pay more?
There are two circumstances where Levy-paying employers are likely to have to contribute more:
where the cost of the training you wish to buy is greater than the funding cap for a particular standard or framework where your organisation has spent all your Levy contribution and top-up and wants to spend more on apprenticeship training.
How does the Levy operate across the devolved nations?
The Levy will be UK wide, so contributions are based on the pay bill for all UK employees, but you can only spend it your employees who are deemed to live in England. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.
Our Levy experts can advise you if your organisation operates across the Home nations.
What does the Apprenticeship Levy mean for small employers?
If your organisation has a pay bill less than £3m it will not have to pay the Levy. In England, our organisation will still be able to access government support for apprenticeships through other training providers. However, MC is exclusively focused on supporting Levy paying employers.