The apprenticeship levy is an amount of money some UK employers are required to pay to fund new apprenticeships.
- It applies to employers with a pay bill in excess of £3m (2% of employers)
- It is set at 0.5% of the pay bill
- You pay it through PAYE
- Each employer can receive an allowance of £15,000 to offset against their levy payment
- Employers in England who pay the levy and are committed to apprenticeship training will be able to get out more than they pay in, through a top-up to their online accounts
A worked example showing how HMRC calculate the pay bill and the levy:
|Employer of 100 employees, each with a gross salary of £20,000|
|Pay bill: 100 x £20,000 = £2,000,000|
|Levy sum: 0.5% x £2,000,000 = £10,000|
|Allowance: £10,000 - £15,000 = £0 annual levy payment|
The graphic above shows a flowchart of the process you need to follow for paying the levy, employing an apprentice and monitoring your online account. It also shows how the process you follow relates to the steps that both training providers and the government take to manage the funding.
Employers who pay the apprenticeship levy can now make a transfer to fund apprenticeships in another organisation. They can view their transfers allowance in their apprenticeship service account and use a new transfers estimator tool to help them plan a transfer.
Recent developments with the levy
The National Apprenticeship Service are now offering levy transfers. Transfers is the first big flexibility being offered to employers to help make apprenticeships work better for everyone. With this new step, there are three developments to note:
- Employers who pay the levy can transfer a maximum of 10% of the annual funds in their apprenticeship service account, which is calculated from the total amount of levy declared during the previous tax year
- Transfers can be made to any other employer. For the first phase, employers can make a transfer to one other employer, but as with all new functions on the service, the NAS will review this based on user feedback
- Employers can transfer funds to another employer to pay for the costs of training and assessment for their apprenticeships. These must be for apprenticeship standards. Transfers cannot be used for apprenticeship frameworks.
Want to know about the next steps? View our apprenticeship roadmap