Apprenticeship levy explained
What is the apprenticeship levy?
The apprenticeship levy is an initiative introduced by the government in 2017 to encourage businesses to invest in apprenticeships, boost skills in the workplace and increase training opportunities. The levy is designed as a form of tax, helping employers fund apprenticeship training.
Who does the apprenticeship levy apply to?
The apprenticeship levy specifically applies to businesses with a payroll of £3 million or more per year, this is known as the apprenticeship threshold. Businesses that meet this threshold are required to contribute 0.5% of the payroll towards the apprenticeship levy, offset by a £15,000 allowance provided by the government.
How is the apprenticeship levy used and collected?
The apprenticeship levy is paid monthly through Pay As You Earn (PAYE) alongside income tax and national insurance contributions. Businesses must declare the levy each month from the start of the financial year. The levy is then stored in a fund, which is only to be used for covering apprenticeship training costs, ensuring that the money is only directly used to support apprentices’ development and skills in the workplace.
Apprenticeship levy contributions appear in a digital account which can be used by an employer to arrange and pay for apprenticeship training. The funds can only be used to be spent on the apprentices training and their end point assessment. After 24 months, any unspent funds will be returned to the Government.
Non-Levy employers
If your business has a payroll of less than £3 million, fewer than 50 employees and you are not part of a larger group of companies, you will not have to make any contributions for apprentices aged 16 to 21, or 19 to 24 who have been in care or have an education, health and care plan from their Local Authority.
If your business does have 50 or more employees, pay just 5% of the cost of training and accessing your apprentice. The government will pay the rest, up to the funding band maximum. Any larger businesses can pledge to use part of their unspent apprenticeship levy to fund apprenticeships for smaller businesses. Check out Funding an Apprenticeship for more information or speak to the apprenticeship team about accessing the Transfer to Transform scheme.
Levy employers
If your business has a payroll of £3 million or more, then you meet the apprenticeship threshold and you are known as a levy paying employer. You are required to pay 0.5% of the payroll towards the apprenticeship levy through PAYE, offset by the government allowance.
If you don’t have enough money in your account to fund an apprenticeship, you will then pay 5% of the costs and the government will pay the rest of the funding band maximum for each apprenticeship.
If you have any money left over in your account, you can transfer up to 25% to fund apprenticeships for a business of your choice. Check out Funding an Apprenticeship for more information.
How do I apply for apprenticeship funding?
To qualify for apprenticeship funding, you must create an account on the digital account service, our apprenticeship team can support you with this.
Once your digital account is created, the government will allocate money to us so we can fund your apprentice for training.
For further information about apprenticeship funding, visit the government’s Funding an Apprenticeship page.
Find out more about apprenticeships
If you are interested in hiring an apprentice or would like to find out more information, please contact the apprenticeships team at apprenticeships@totton.ac.uk or 0300 123 3385 for further information.
