What is the Apprenticeship Levy?

The Levy is a UK tax that was introduced in April 2017 for companies with an annual wage bill in excess of  £3 million.  The levy is charged at a rate of 0.5% with each employer receiving a annual allowance of £15,000 to offset against their levy payment.

The levy is payable to HMRC through the pay-as-you-earn process alongside payment of income tax and national insurance contributions which then is held in a Digital Apprenticeship Service (DAS) account.

Funds of which are paid into the DAS account will be available to spend on Apprenticeship Training for 24 months from the date of payment. All funds that are not spent after this period will expire and will be reclaimed by HMRC and this includes the 10% contribution.

The Levy objectives

• To give the employer control over the funding of Apprenticeships
• To manage which employee’s the Apprenticeship Levy funds are spent on
• To provide additional incentives to support 16-18 Year old enrolling onto an Apprenticeship
• To encourages organisations to recruit Apprenticeships to bring new skills and staff into the business
• To increase staff performance and retention within an organisation paying into the Apprenticeship Levy
• To increase quality in qualifications being delivered

Key Facts about the Levy

• 0.5% is calculated on your full UK payroll bill not just the amount over £3,000,000
• You have 24 months to spend money from your Levy account for the day funds are put into your Digital Apprenticeship Service Account (DAS)
• You will get an allowance of £15,000 per tax year which is offset to the Levy payment made
• As an employer you will receive an incentive of £1000 if you take on an Apprentice between the ages of 16-18 years old. A payment of £500 will be made after 3 months and a further $500 on completion.
• The Apprenticeship Levy can be used all your employees no matter what age as long they meet the requirements of the Skills Funding Agency (SFA)
• All unused Levy spend will expire after 24 months of payment into the account
• Once the organisation has spent their Levy funds available they will then only have to pay a 10% co-investment towards the qualification of which the employee is going to enrol onto

Sharing your Levy funds

The answer is yes but only 10% of the employer contribution can be shared between other Levy paying companies and can be distributed between as many companies as you like. As of April 2019 this will be increased to 25%.

Calculating your Levy spend

The Apprenticeship Levy applies to all organisations in the UK. The amount of money that is paid into your Apprenticeship service account will be the amount of which you will have to spend on training in England. The government will apply a 10% contribution into your Levy account and this can also be spend on Apprenticeship training in England. The top up will be applied to the DAS account monthly and based on your wage bill for that month that will determine how much is allocated to your account. This means for every £1 that is contributed into the account you will get £1.10 which includes the government contribution.

Non Levy means any employers who have a wage bill less than £3,000,000 fall into this category.

The employer only pays a 10% Contribution towards a full Apprenticeship Standard, the remaining 90% is funded by the government. This is set to change in April 2019, meaning the contribution will then only be 5% by the employer and the government will top up the final 95% towards the Apprenticeship.

The Government have issued incentive for employers who take on an Apprentice between the age of 16-18 years old. The incentive is a £1000 grant for the year. £500 is paid to the employer after the Apprentice completes 3 months of their Apprenticeship and the final £500 is paid upon completion.