The Apprenticeship Levy applies to all employers. Those with a payroll bill of £3m or more pay a monthly charge into the fund which is used to help pay for apprenticeship training costs. If your payroll bill is below £3m you won’t actually contribute towards the scheme, but you can still benefit from it.
The levy was introduced by the Government in 2017 (and updated in 2019) to improve training provision for apprentices and to ensure employers engaged with their apprentices’ journeys. As a result of its implementation, there is more money available than ever before for apprenticeship training and allows employers to choose which apprenticeships they offer.
All employers need to calculate their annual pay bill for which a 0.5% levy will be charged. However, there is an annual allowance of £15,000, which means in reality only employers with a pay bill of £3m or more will actually pay the levy and will fall under the reporting requirements to HMRC.
There can be confusion when a company has other companies linked or legally connected.
Connected companies or charities will only have one £15,000 allowance to share between them. If you are connected to any other employer and your combined pay bill is below £3m, you will not need to pay the levy. You can decide how you’d like to share the allowance across schemes but only one £15,000 allowance on the levy can apply to all the connected companies; similar to the employment allowance rules. Once you have decided on how the allowance will be shared, this cannot be changed mid-tax year.
Although the allowance and levy are based on an annual figure, employers must report and pay the levy each month. Like PAYE, where a cumulative tax code is in operation, the levy and allowance accumulate each month. Where the pay bill (£3m/12) exceeds the allowance, 0.5% of the pay bill that month over the allowance will be applied. If the annual pay bill doesn’t reach £3m this will eventually be refunded to the employer via the payroll where it happens before the end of the tax year. If your levy funds have not been spent within 24 months, the money goes back to the Government to provide 95%-100% apprenticeship funding to SMEs.
All the information is reported via the payroll Employer Payment Summary (EPS) submission to HMRC on a monthly basis. If you operate different pay frequencies on the same PAYE scheme these will need to be added together.
You can register online to manage your apprenticeships. You can manage funding, receive a transfer of apprenticeship funds, advertise vacancies and choose apprenticeship training courses and providers.
Employers who pay the levy, will be able to add PAYE schemes to use for apprenticeship funding, add training providers and even transfer a maximum of 25% unused annual funds to other employers.
Those in England paying the levy will also receive a 10% top-up to their monthly contributions to spend on apprenticeship training.
Employers who do not pay the levy will be able to reserve apprenticeship funding.
Smaller employers are able share the cost of training and assessing their apprentices with the Government. For apprenticeships that started on or after 1 April 2019 employers pay 5% towards the cost of apprenticeship training. The Government will pay the rest (95%) up to the funding band maximum.
Making the most of the levy allows you to provide training tailored to your business’s needs and upskill employees, providing for greater engagement and loyalty in the workforce.
Using the fund for training existing staff also means you maximise the amount you pay into the levy, without additional costs. Additionally, in a candidate-led job market, an employer’s training offering also plays an important part in recruitment.
The apprenticeship training scheme and registration differ across the UK. More information can be found here.