The Apprenticeship Levy was introduced in 2017, and this was the government changing the way Apprenticeships are funded. We have supported many employers over this time to use their levy fund effectively to upskill and hire new talent.
Recently, the levy programme hit a two-year point and since this point, unspent backdated funds will expire. We have produced a guide to offer advice on how the levy can be utilised, so employers do not suffer losing unused resource.
For those looking for some introductory information on the levy, then we are here to explain how the Apprenticeship Levy works and how it can benefit your business.
1. What is the Apprenticeship Levy
2. Why was the Apprenticeship Levy introduced?
3. When did the Levy come into effect?
4. Does my company have to pay the Apprenticeship Levy?
5. What defines a payroll
6. How would my company pay the Apprenticeship Levy?
7. What is the £15,000 allowance, and how does it work?
8. My company is a group of connected companies. How does the Levy effect this?
9. I’m paying the Levy. What advantages will it bring towards my company?
10. I don’t need to pay the Apprenticeship Levy; will I have to contribute any costs?
11. Can I use the Levy to train my existing staff??
12. What’s next?
The Apprenticeship Levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in Apprenticeships (0.5% of their annual pay bill).
The Apprenticeship Levy aims to improve the quality and quantity of Apprenticeships in England and so it can meet the government target of 3 million Apprenticeships by 2020. An additional significant facet of the Levy is providing a sustainable workforce and bridge the skills gap affecting many industries, including tech.
6th April 2017
The levy is paid 0.5% from an employer’s pay bill. However, since each employer receives a £15,000 offset allowance every tax year, the majority of companies do not need to pay anything at all.
For example, a company with a payroll of £3 million would pay nil, this is because 0.5% x £3 million = £15,000.
Example 1: an employer who needs to pay the levy
An employer with an annual pay bill of £5,000,000:
levy sum: 0.5% x £5,000,000 = £25,000
subtracting levy allowance: £25,000 – £15,000 = £10,000 annual levy payment
Example 2: an employer who does not have to pay the levy
An employer with an annual pay bill of £2,000,000:
levy sum: 0.5% x £2,000,000 = £10,000
subtracting levy allowance: £10,000 – £15,000 = £0 annual levy payment
You can calculate how much your company needs to pay with our easy levy calculator
Disclaimer This tool is designed to be illustrative only. The actual amount of levy you need to pay may vary, for example, this tool may underestimate the amount of levy you need to pay and therefore receive if your organisation is part of a group. Just IT is not responsible for the consequences of any decisions or actions taken in reliance on the information provided by this tool.
A payroll is defined on total employee earnings subject to class 1 secondary NICs. Earnings include any remuneration or profit coming from employment, such as wages, bonuses, commissions, and pension contributions that you pay NICs on.
Additional detailed guidance can be found here:
If you have to pay the Apprenticeship Levy, you should calculate, report and pay on a monthly basis to the HMRC, through the PAYE process alongside tax and NICs.
The £15,000 levy allowance is divided monthly so you will only pay for a given month if your liability is less than £1,250. Any unused allocation money will carry over towards the next month.
For example, if your company only used £1000 of your levy allocation money in month A, alongside not paying the levy for that month, your allowance would also be £1,500 for month B.
When a group of companies are connected, they can only use one £15,000 levy allowance. However, this allowance can be split towards all businesses in the group but this must be decided and notified to HMRC before the start of the tax year, it cannot also be changed for the rest of the tax year.
Any company paying the levy will have access to the new digital account system, which enables you to pay for training and assessment for Apprentices in England, provided as a voucher system. You are also able to search for training providers like Just IT to help deliver your Apprenticeship programme. You can register with this service here:
However, digital funds and government funding cannot be used for:
Your company will have up to 24 months to spend these vouchers or they will otherwise expire and cannot be used again.
Non-levy paying employers still have to make a small contribution towards training an Apprentice.
Any Businesses with under 50 employees won’t need to pay for anything taking on a 16-18 year -old Apprentice, with the government contributing 100% towards the total cost of training.
Your Internal Workforce Development Program can be funded through the Apprenticeship Levy, provided the employee will be learning new skills/knowledge, the Apprenticeship is relevant to their role and is the most appropriate way towards progressing their career.
At Just IT we would like to help your business take advantage of the Apprenticeship Levy and alleviate any concerns you may have.
If you’re seeking advice regarding the Apprenticeship Levy or if you’re interested in taking on an IT and Digital Apprentice, then please get in touch to our Employer Relationship Team on 020 7426 9835.