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Apprenticeship levy

Since April 2017, the way that the government funds apprenticeships has changed. All employers operating in the UK with an annual pay bill of more than £3m are now charged a levy of 0.5%. We’ve collated everything you need to know about the levy, give you a better understanding of the cost of apprenticeship training, and how you can use it to hire finance and accountancy apprentices.

How the apprenticeship levy works

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

  • 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.
  • 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 May 2017 will start expiring from May 2019.
  • 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.
  • Employers can use their levy money to buy apprenticeship training for employees at all levels and ages, including graduates who may be eligible to apply for an apprenticeship programme if the subject area is different to what they have previously studied. What’s more, the money can be used to fund existing employee development, providing they meet the apprenticeship criteria.
  • 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 support them. The government will pay 95% of the cost of apprenticeship training any additional apprentices, providing that the employer pays a 5% contribution of the apprenticeship funding.

How the levy fund works for non-levy payers

  • If an employer is not paying the levy, they won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least late 2019.
  • However, they can use the digital system to browse the available apprenticeship standards, approved providers and assessment organisations – and find one that’s right for them.
  • A non-levy fund paying employer is able to employ an apprentice using a co-investment approach. This involves them paying a 5% contribution to the cost of apprenticeship training – which they will need to pay directly to the training provider. The government will pay the remaining 95%, up to the maximum amount of funding available for that particular apprenticeship standard.