Last reviewed 2 September 2020
The apprenticeship levy is a government initiative that came into force in 2017. Hannah Williamson, Advice Manager at Croner, summarises the scheme.
Who has to pay the levy?
Employers in any sector operating in the UK with an annual pay bill of more than £3 million, regardless of whether they already pay into an existing industry levy scheme.
What makes up the pay bill?
Wages, bonuses, commissions, and pension contributions that are paid on NICs. Benefits in kind are not included.
How is it paid?
Organisations calculate, report and pay the levy to HMRC, through the PAYE process alongside tax and NICs.
How much do I have to pay?
Organisations pay 0.5% of their annual pay bill, minus an allowance of £15,000. The Government will then add a further 10% of what is in the account.
What if I am part of a group of companies?
Each company within the group must pay the levy if they meet the wage bill criteria. Only one £15,000 allowance can be applied across the group however.
Where will our money be kept?
In a digital apprenticeship service account. If an organisation wants to take on apprentices, they use this money to buy the training and assessment part of the apprenticeship. The funds will expire after two years.
How will I find apprentices?
Through the Digital Apprentice Service that can be found on the Government website.
Organisations can choose the apprenticeship framework, training provider, assessment organisation and post apprenticeship vacancies.
Can we spread our funds around?
In April 2019, legislation was updated to allow you to be able to transfer 25% of your levy funds to organisations within your supply chain.
What if we don't have enough funds in our account to pay for the apprenticeship?
New funds should enter your account every month for as long as you pay the levy. The costs are spread over the full length of the apprenticeship and are met in monthly instalments. Only funds that are not spent after 24 months will expire — this is to help reduce the chance of funds expiring.
However, if you really don't have the funds to cover the monthly cost, the Government will pay 90% of the balance due.
The levy affects employers in all sectors, so don't assume you're exempt. Here are the key points you need to take away.
Calculate your wage bill to see if you meet the criteria. Those in a group structure will need to individually assess themselves against the criteria and the allowance.
The funds in the digital account are to pay for the training and assessment of apprentices, not for their wages.
You will have to pay the levy regardless of whether you currently have any apprentices, or whether you intend to take any apprentices on.