The Apprenticeship Levy is a payroll tax that the government implemented in April 2017 to help meet its target of delivering three million Apprenticeships by 2020. An employer is classified as either a Levy Payer or a Non-Levy Payer.
Who pays the Apprenticeship Levy?
As an employer, you’ll have to pay Apprenticeship Levy each month if you:
- Have an annual pay bill of more than £3 million
- Are connected to other companies or charities for Employment Allowance which in total have an annual pay bill of more than £3 million
- Your annual pay bill is all payments to employees that are subject to employer Class 1 secondary National Insurance contributions such as wages, bonuses and commissions. You must include payments to:
– all employees earning below the Lower Earnings Limit and the Secondary Threshold
– employees under the age of 21
– apprentices under the age of 25
How much you need to pay?
The government announced a ‘levy allowance’ of £15,000 per year. This means that the total amount companies will need to spend is 0.5% of your pay bill, minus £15,000. Money will be paid automatically through PAYE alongside Income Tax and National Insurance.
An employer has 500 employees, each with a gross company salary of £20,000
Wage bill: 500 x £20,000 = £10 million
0.5% x £10 million = £50,000
£50,000 – £15,000 government allowance
Levy total = £35,000
How will this be collected?
The levy will be collected by HMRC each month, directly via PAYE processes. Employers can register with the National Apprenticeship Service and can directly view their account through the Levy Portal.
What can I spend the Levy on?
The Levy can be spent on Apprenticeship Training and the associated costs. This can be used to fund things such as recruitment and CPD training to support the Apprentice but cannot be used towards their salary.
What will happen to my Levy if I don’t use it?
Employers were given 24 months to use the levy. If they didn’t use it in that time, it was given to other employers to use. For example, funds which entered an employer’s account in September 2017 would have expired in September 2019. The digital account will let an employer know in good time when funds expire.
The ESFA now have a system to allow levy-paying employers to transfer funds to other employers, for example in their supply chain so that they can benefit from training Apprentices.
Please contact our Contracts and Compliance Team if you would like to know more about this.
Teresa Wilson, Head of Contracts & Compliance/ATA
Tel: 01634 298800
Apprenticeship Levy Transfer
From April 2019, employers can transfer up to 25% of levy funds (to as many other employers as required across their supply chains) to cover the costs of training Apprentices, providing further flexibility for levy paying organisations.
GOV.UK: Guidance – Pay Apprenticeship Levy
Click here to find out more on when you have to pay Apprenticeship Levy and how to report your payments on the GOV.UK Website.