An overview of the apprenticeship levy


An overview of the apprenticeship levy

Please be aware that the following information refers only to businesses and apprenticeships in England. For operations in Scotland, Wales or Northern Ireland, you should contact your local authority for the most relevant information.

What is the apprenticeship levy?

The apprenticeship levy is a payment large employers pay to HMRC to pay for apprenticeship training. The aim of the levy is to encourage businesses to invest in apprenticeships and to improve their quality by raising additional funds.

Any apprentices who started their programme with you before May 1st 2017 are not be affected by the funding. You must continue to fund their training under the terms that were in place at the start of the apprenticeship.

What businesses have to pay the apprenticeship levy?

If you’re an employer with an annual pay bill of over £3 million, you must pay the apprenticeship levy. This rule came into force in April 2017. You will pay your levy to HMRC through PAYE. You will make monthly payments, so you can spread the cost of the apprenticeship.

How much is the levy?

The total levy payable per year is 0.5% of your company’s payroll, with an allowance of £15,000. So if your annual payroll is £3 million, you won’t pay anything, as your allowance covers the full 0.5%. If your annual payroll is £6 million, 0.5% would be £30,000. This means that you would pay £15,000 after deduction of your allowance.

Levy payments are taken automatically and applied to your online digital apprenticeship service account a few days later. They also benefit from a 10% top-up from the government. This means that for every £1 a business puts in, they get an extra 10p for free.

What can businesses use their levy for?

Businesses can only use the apprenticeship fund to pay for training and assessing apprentices that work in England for at least 50% of the time. You cannot use these funds to pay for any other associated costs. This includes wages, travel costs, work placements or setting up the apprenticeship programme.

You may only use up to the funding band maximum for your chosen apprenticeship. Should your costs exceed this amount, you must pay the difference from your own budget.

Find out more about the apprenticeship funding rules if you’re not sure what you can and can’t pay for with your apprenticeship funds.

Non-levy paying employers

Non-levy paying businesses will split the cost of apprenticeships with the government, which is known as ‘co-investment’. This allows smaller businesses to benefit from apprenticeships where they otherwise would not be able to afford them.

These businesses will pay 10% of the cost to train and assess apprentices, while the government will pay the remaining 90%,up to the funding band maximum.

How do businesses choose an apprenticeship provider?

While there are many different industries and levels for apprenticeships, there are two different types of apprenticeship model.

Apprenticeship standards cover a specific occupation. They will deliver the core skills, knowledge and behaviours that an apprentice will need to succeed in this occupation.

Apprenticeship frameworks are work-related vocational and professional qualifications. Delivery takes place both in workplace and classroom settings, developing both the practical and the theoretical aspects of the role.

Whatever apprenticeship provider you choose, they will adhere to the relevant apprenticeship standard or framework to ensure consistency.

Are you looking for an apprentice for your business?

Get in touch with CEATA to find out more about our apprenticeships and how hiring an engineering apprentice can benefit your business.

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