A Complete Guide To The Apprenticeships Levy for Employers

If your business has a payroll bill of more than £3 million, then it must pay the Apprenticeships Levy. If you’re interested in learning more about the Apprenticeships Levy and how it is best utilised, keep reading as we’ve created the only guide you’ll ever need to bookmark on the topic.

We’ve also created a handy companion PDF to this guide, so go ahead and download it here:

What is the Apprenticeships Levy?

The Apprenticeships Levy is a tax on employers who have a payroll bill exceeding £3 million. The tax is 0.5% of their total bill, and is paid through P.A.Y.E to HMRC. The tax is then held in a ‘digital fund’ which the employer can access for the purposes of apprenticeship training.

The Apprenticeship Levy was announced in 2015 and became law in 2016. It was designed to create long-term, sustainable funding for the apprenticeships scheme. Employers are encouraged to use or lose their apprenticeships levy tax pot, and invest in staff training.

Does my business need to pay the Apprenticeships Levy?

apprenticeships levy explained

Only 2% of all the businesses in the UK qualify as levy payers. The bands will change every year, but at the moment, your business will pay the levy if it pays over £3,000,000 in payroll bills.

In this case, your business will pay 0.5% of its total bill as a tax. However, you will only pay this tax on the percentage of your workers who are based in England.

Businesses who do not qualify for the levy will have the cost of apprenticeships partially funded by the government. The government will contribute 95% of the fees and your business will pay only 5%. 

If you’d like to know more about funding apprenticeships as a non-levy payer, you can see our guide here.

How Long Are Apprenticeship Levy Funds Available For?

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Previously employers could only access apprenticeship levy funds for 18 months from the date they were first paid in. This includes your monthly top up bonus.

The government has now extended the amount of time your business’ apprenticeship levy funds are available. You can now access your funds for a maximum of 24 months from when they were first paid in. 

What is the government apprenticeship levy top up?

Whatever you pay into your apprenticeships levy pot each month, the government will top up that amount by 10%. 

How Do I Manage and Access My Apprenticeship Levy Pot?

After your business has paid its levy bill to HMRC, the business will be able to access funds through the apprenticeships service, using its online portal – The Direct Apprenticeships Service.

The funds are only available to be spent on apprenticeship training in England.

If you’re having trouble managing accessing your levy funds, you can always give us a call. We’ve helped plenty of businesses who are levy payers. Just give us a ring on 01244 678100.

You can use this service to get apprenticeship funding, find apprenticeships, find, save and manage training providers, recruit apprentices and manage apprenticeships you are currently running.

To access your apprenticeship funding you’ll need to create an account on the government’s apprenticeships service website. You can do so using the link below:

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How Much Will My Business Contribute To The Apprenticeships Levy?

Employers will contribute to the apprenticeships levy based on any payments that are subject to Class 1 NI contributions. You will also need to include:

  • Employees earning below the lower earnings limit and secondary threshold.
  • Employees under the age of 21
  • Apprentices under the age of 25

You do not need to include: 

  • Employees under the age of 16
  • Employees not subject to NI contributions
  • Earnings which are subject to class 1A NI contributions such as benefits in kind.

Employers can also benefit from a Levy allowance of £15,000 a year. So the Apprenticeships Levy you have to pay throughout the year is reduced by £15,000.

Examples of what employers will pay:

An employer with an annual pay bill of £5,000,000:

Levy sum: 0.5% x £5,000,000 = £25,000

Subtracting levy allowance:

£25,000 – £15,000 = £10,000 annual levy payment

A few more key points about the Apprenticeships Levy...

  • Connected companies or charities can only share one £15,000 allowance between them.
  • If you’re a franchise, you’ll still need to pay the Apprenticeships Levy if you qualify.
  • You can’t carry an unused Apprenticeships Levy allowance into the next tax year.
  • Apprenticeship Levy payments can be deducted from your Corporation Tax bill.

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