Apprenticeship Levy

Launched in April 2017, the Apprenticeship Levy is a payment that is collected from large employers who have an annual wage bill of more than £3 million and applies to both the public and private sectors. The payment is paid to the HMRC through the business’ PAYE returns.

Managed by the ESFA, the purpose of the Levy is to encourage employers to invest in apprenticeship programmes and to raise additional funds to improve the quality and number of apprentices in the UK, addressing the nationwide skills shortage in the process.

How are your payments calculated?

The Levy amount is 0.5% of a business’ payroll; employer’s gets an allowance of £15,000 to offset against the amount they owe and only applies to businesses with a payroll over £3m. For example:

A business with a payroll of £3m:
£3,000,000 (payroll) x 0.5% (levy amount) = £15,000 (amount owing pre allowance) – £15,000 (levy allowance) = £0 (levy payable)

A business with a payroll of £6m:
£6,000,000 (payroll) x 0.5% (levy amount) = £30,000 (amount owing pre allowance) – £15,000 (levy allowance) = £15,000 (levy payable)

Businesses paying the levy can access their contribution from their Online Digital Apprenticeship Service account that can be used to pay for apprenticeship training and assessment in England.

Big firms begin losing their payments from April 2019

From April 2019, levy payments dating back to the start of the scheme will go to the Treasury, and funds will continue to be funnelled away each month on the second anniversary of when they were paid in. So, for example, the levy payments that companies made in September 2017 will no longer be available to invest in apprenticeship programmes from September 2019.

Levy-paying employers are able to transfer 25% of their levy funds to other organisations

From April 2019, large employers who pay the Apprenticeship Levy can transfer up to 25% of their annual funds to other organisations. They can make transfers from their apprenticeship account to as many employers as they choose. It means firms can use some of their unspent levy funding, which would otherwise go to the exchequer, to support smaller employers to take on apprentices.

Transferred funds will be used to pay for the training and assessment cost of the apprenticeships agreed with the receiving employer.

Levy-paying employers who want to transfer funds can find companies who want money in a number of ways. For instance, they can work with an employer in their own supply chain, get in touch with an Apprenticeship Training Agency, or work with regional partners.

Find out more about how to transfer funds and find a suitable non-levy paying employer

Non-levy paying employers receive support from government toward apprentice costs

Non-levy paying employers will share the cost of training and assessing their apprentices with government – this is called ‘co-investment’.

The co-investment rate has changed for new apprenticeships starting on or after 1 April 2019. You will now pay 5% towards the cost of apprenticeship training. The government will pay the rest (95%) up to the funding band maximum.

All apprenticeships that started before 1 April 2019 will continue at the previous co-investment rate of 10%.

Find out more about the Apprenticeship Levy by visiting www.gov.uk.