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Apprenticeship levy

Since April 2017, the way that the government funds apprenticeships changed. All employers operating in the UK with an annual pay bill of more than £3m are now charged a levy of 0.5%. Funding is available for organisations of any size, in any sector. Employers can use their levy money to buy apprenticeship training for employees at all levels and ages.

How the apprenticeship levy is calculated

An employer’s pay bill is based on total employee earnings, subject to Class 1 secondary National Insurance contributions (NICs). These include employee expenses and benefits.

Paying the levy is quite easy. The levy is payable through PAYE, alongside income tax and National Insurance. Payment is taken monthly, in real time, so as an employer’s pay bill changes each month, so will their levy amount.

How the apprenticeship levy works for levy payers

  • The Education and Skills Funding Agency (ESFA) would like all employers to create an account for the apprenticeship service - an online portal to view, manage and spend their funds on approved apprenticeships - including the ICAEW Level 4 and Level 7 apprenticeships. 
  • Existing and new staff are eligible, providing they meet the apprenticeship criteria. 
  • An employer’s levy payment is ring-fenced in the form of a digital voucher for them to use. They can manage this from their digital account. Funds can be used for tuition and assessment costs which are eligible for ESFA funding. Unused vouchers will expire after 24 months. This means that levy paid in September 2019 will start expiring from September 2021.
  • The government applies a 10% top-up to monthly funds, so for every £1 an employer puts in, they will have £1.10 to spend.
  • What’s more, the government are offering an ‘allowance’ of £15,000 to offset levy payments – so an employer has extra money to spend.
  • If the funds in an employer’s digital account aren’t enough to cover the cost of training and assessment for all of their apprentices, the government will fund 95% of the cost of training additional apprentices. So the employer pays a 5% contribution.
  • Although the levy is based on an employer’s full UK pay bill, they are only able to spend their English proportion on English apprenticeship training. The Scottish proportion of apprenticeship  funding has not been ring-fenced for training by the Scottish Government, so this money may be lost.

How the levy fund works for non-levy payers

  • Employers who do not pay the levy should create an apprenticeship service account to reserve funding and select a tuition provider ahead of someone starting an apprenticeship. Alternatively, non-levy paying employers can contact tuition provider to arrange funding. 
  • A non-levy fund paying employer is able to fund an apprentice using a co-investment approach. This involves them paying a 5% contribution to the cost of apprenticeship training. The government will fund the remaining 95%, up to the maximum amount of funding available for that particular apprenticeship standard.