Levy questions answered

If your business has an annual pay bill of over £3 million, then you will be impacted by the Levy and the changes to government funding of Apprenticeships.

Our Q&A highlights some of the key features of the new levy and how it will affect you and your organisation – including some of the great benefits. 

What is the Apprenticeship Levy?

The levy is being introduced to drive an increase in Apprenticeship numbers – and quality. It will help to raise the level of skills available in the economy through education and training, encouraging you as an employer to invest in apprentices and take on more.

The levy will be charged at a rate of 0.5% of your yearly pay bill. The rate has been established to deliver the increase in quality that businesses have been asking for without placing an unreasonable burden on employers.

Will I have to pay the levy?

You will pay the levy if you are an employer in the UK (in any sector) with a pay bill exceeding £3 million per year, on which there is a liability to pay Class 1 secondary National Insurance Contributions (NICs).

If you already contribute to an existing industry levy scheme, you will still be required to pay the Apprenticeship levy if your pay bill is over £3 million.

If you do not have a pay bill of over £3 million, you will not be required to pay the levy. The government will provide financial support for you to take on Apprenticeships, but you will be expected to make a small financial contribution to the cost of training and assessment in partnership with the government.

What is the £15,000 allowance and how does it work?

You will have a levy allowance of £15,000 per year to offset against the levy you pay, and will receive a monthly 10% top-up from the government which will be added to funds you have for spending on Apprenticeship training.

If you have multiple PAYE schemes and do not use the full £15,000 allowance, you will be able to offset the unused amount against another one of your schemes. If you are part of a group of connected companies, you will only be able to use one £15,000 allowance.

How will I pay the levy?

You will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.

Once you have paid the levy to HMRC, you’ll be able to access funding for Apprenticeships (including training and assessment) through a new digital Apprenticeship service account which you will be able to register for from January 2017.

When will the levy come into effect?

The Apprenticeship Levy comes into effect in April 2017.

The first time you will see any funds in your digital account will be late May 2017, from which point you can start spending your levy funds. Funds will appear in your digital account monthly, a few working days after you have confirmed your pay bill and levy contribution to HMRC for the previous month.

What can I use my funds on as an employer?

Funds in your employer’s levy account can only be used towards the cost of Apprenticeship training and the final assessment an apprentice will need to take. However, there is the flexibility for employers to spend the money on Apprenticeship training that they judge best meets their needs.

Every Apprenticeship standard and framework will be placed in a funding band, which will define the maximum amount that can be used towards training and assessments costs over the length of each Apprenticeship.

Is there a time limit in which to spend my levy funds?

Levy funds (and top-ups) will expire 24 months after they appear in your digital account unless they are spent on Apprenticeship training.

Is there other funding support available?

You may also be eligible for extra employer incentive payments, including for successful completion, taking on 16-18 year-olds and if you are an SME.

For more need-to-know information and updates on the Apprenticeship Levy, visit the government website.

Remember, you can speak to us directly too – visit us at the Hub or get in touch right now.