Apprenticeship Levy: what is it and who will it affect?

06 April 2017

Today marks the introduction of the apprenticeship levy. With much confusion on the matter, we’re here to break it down in to manageable, understandable chunks.

What is it?

The apprenticeship levy is a tax on UK employers that’s been introduced to fund new apprentices.

The levy is a result of the government’s commitment to increase the quantity and quality of apprenticeships in the UK – the government has pledged to deliver an additional three million apprenticeship starts in England by 2020.

What will the money be used for?

The funds raised from the levy will be used to improve the quality and support of training employers recruiting apprenticeships receive.

Employers who are committed to bringing apprentices into their workforce will be able to get back more than they put in, the government says.

Who will be affected?

The levy applies to all sectors and will be inflicted on businesses with an annual pay bill of £3 million or more. Those with a pay bill of less than £3 million will not be affected. Due to the criteria set, less than 2% of UK employers will be affected by the levy.

Do I have to pay the levy even if I don’t have any apprentices?

Yes. Regardless of whether or not you currently employ apprentices or plan to recruit any in the future, if your business has a pay bill of £3 million or more, you’ll have to pay the levy.

How much will affected businesses pay?

The apprenticeship levy will be charged at a rate of 0.5% of an employer’s payroll.

So, for example, if your business has an annual payroll of £3.5 million, your apprenticeship levy fee for the year would be £17,500.

If your business isn’t connected to another company or charity, you’ll be given an Apprenticeship Levy allowance of £15,000 a year.

In the instance given above, this means the amount you’d need to pay towards the levy would be reduced to £2,500.

Are there any monetary benefits?

Yes. If you’re an employer in England who’ll be required to pay the levy, you’ll get a 10% top up on the money you put in. In practice, this means every £100 you put in will be increased to £110.

Your funds will expire after one year if they haven’t been used on apprenticeship training.

How will the levy be paid?

Employers will pay their apprenticeship levy via their normal payroll process.

What happens if I don’t pay?

The penalties and appeal process for non-payments will be the same as that for income tax.

How much will the government raise?

With year-on-year increases, by 2021, the government anticipates it’ll receive in excess of £3 million from the apprenticeship levy:

  • 2016 to 2017: £0
  • 2017 to 2018: £2,730,000
  • 2018 to 2019: £2,845,000
  • 2019 to 2020: £2,970,000
  • 2020 to 2021: £3,095,000

What happens to my money once it’s been paid?

Your levy will be collected by HMRC. For apprenticeship training in England, you’ll be able to access your funds through a Digital Apprenticeship Service (DAS) account.

On DAS, you’ll be able to check out training providers, choose apprenticeship training courses relevant to your business and find candidates for your programmes.

How do I draw out money from my apprenticeship levy fund?

In England, money will be accessible via a voucher system. First, you’ll need to register you and your apprentice’s details online, and then you’ll be able to see how much can be drawn out for each apprentice.

What can I use the funds for?

Apprenticeship levy funds may only be used for apprenticeship training costs. They can’t be put towards other associated costs like wages or travel, for example.

If you need any support with the new apprenticeship levy, give us a call or contact us online.

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