Frequently Asked Questions about the Apprenticeship Levy for Employers
We are often asked what is the Apprenticeship Levy? Navigating your way around the Apprenticeship Levy can be difficult. This guide addresses the most frequently asked questions regarding the apprenticeship levy; how to spend it and how best to maximise the funds to benefit your business.
What is the Apprenticeship Levy?
- What is the Apprenticeship Levy?
The Apprenticeship Levy is part of the government’s plan to increase the quantity and quality of Apprenticeships. The Levy is a tax that came into force on April 2017 which aims to fund three million new Apprenticeships in England by 2020.
- How will the Levy benefit my business?
One of the most significant benefits of apprenticeships, for both employers and staff, is that they help organisations keep their employees motivated and committed for the long-term, by helping them develop their skills. Recruiting new staff is costly, but up-skilling existing staff through apprenticeships is a great way to fill any skills gaps and allow your business to source future managers and leaders from within.
With the rising costs of higher education many young people are investigating alternative career pathways, and by investing in apprentices who are just starting out, you’ll be able to nurture home-grown talent with the most up-to-date and relevant skills your business needs.
- Aren’t Apprenticeships just for ‘tradespeople’ – plumbers, builders and electricians?
Absolutely not! Apprentices are available in every industry sector and provide exciting, high quality opportunities in their chosen field.
Apprentices can now gain qualifications ranging from those equivalent to five GCSE passes, right up to degree level.
Paying the Apprenticeship Levy
- Who pays the Apprenticeship Levy, and how much is it?
Whether a company pays into a levy account depends entirely on the business’ annual payroll. Businesses with an annual payroll of £3m plus will be obliged to pay into a levy digital account.
The Levy is deducted monthly and is only a small percent of the annual payroll, currently at 0.5%, with an allowance of £15,000 to offset against the levy payable.
All employers hiring Apprentices will have to pay for Apprenticeships either through the levy pay bill tax or through a co-investment cash contribution.
If you have a pay bill of less than £3m, you will not pay the levy, but you can still access apprenticeship training by contributing 5% of the cost of training an apprentice (as of April 2019) and the government will ‘co-invest’ by paying the remaining 95%.
Businesses with under 50 employees won’t pay anything if they employ apprentices under the age of 19, and they’ll receive a £1,000 payment with an additional £1,000 payment to the training provider.
More information can be found here from the Government website.
- How does the government collect the Apprenticeship Levy?
Payments are collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), alongside tax and National Insurance.
Spending the Apprenticeship Levy
- What happens after I start paying the Levy?
Once a business has registered and paid the levy, they will then be able to access funding through a digital apprenticeship service account. You can then select Government-approved training providers, such as NTG Training, who will help you source the right apprenticeship course, advertise your apprenticeship vacancies and help you find an apprentice.
- Do I have to spend the Levy fund?
Employers do not have to spend the funds, but if you do not use it, the funds expire after 24 months.
If you haven’t spent yours yet, don’t panic. NTG Training can work with you to identify your training needs and help maximise the funds you have available.
- What can the Apprenticeship Levy be spent on?
Employers can spend their Levy funds on apprentice training for either existing staff or new apprentices, as long as the training meets an approved standard or framework and the individual meets the apprentice eligibility criteria.
- Can the Levy pay for other apprenticeship costs, such as wages?
The Levy can only be used to fund Apprenticeships. It cannot be used for apprentice running costs such as:
- Travel and subsidiary costs
- Work placement programmes
- Managerial costs
- Statutory licenses to practice
- The costs of setting up an Apprenticeship programme
- What if I don’t use all or any of my Apprenticeship Levy?
Levy-paying employers are able to transfer up to 25% of their Levy funds to other businesses within their supply chain. This is ideal for those looking to collaborate with other companies they work alongside where there might be a mutual benefit to upskilling their staff or taking on an apprentice.
To find out more about the Apprenticeship Levy and how to get maximum benefit from it, contact our Customer Service team at NTG Training.