Levy Funding

Posted by on Feb 7, 2014 in Blog, Front Page | 0 comments

Apprenticeship levy – How it will effect you…

The Apprenticeship Levy – What’s it all about?

In May 2017 the way the government funds apprenticeships in England changed. Some employers are now required to contribute to
a new apprenticeship levy, and there has been changes to the funding for apprenticeship training for all employers. The apprenticeship levy requires all employers operating in the UK, with a pay bill over £3 million each year, to make an investment in apprenticeships. You can benefit from this investment by training apprentices.

For the purposes of the levy, an ‘employer’ is someone who is a secondary contributor, with liability to pay Class 1 secondary National Insurance Contributions (NICs) for their employees. The levy will be charged at a rate of 0.5% of your annual pay bill. You will have a levy allowance of £15,000 per year to offset against the levy you must pay. This means you will only pay the levy if your pay bill exceeds £3 million in a given year. You will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.

The levy money paid to the HMRC will be placed into the employers online levy account so they can pay for apprenticeship training for their staff.  This money cannot be used for paying wages, additional training or travel costs for instance.  The levy account monies are for apprenticeship training only.

Calculating what a levy employer has to pay:

You will pay the levy on your entire pay bill at a rate of 0.5%. However, you will have a levy allowance to offset against this.  The levy
allowance is worth £15,000 for each tax year.  This means the levy is only payable on pay bills over £3 million (because 0.5% x £3million = £15,000).

The levy allowance will operate on a monthly basis and will accumulate throughout the year. This means you will have an allowance
of £1,250 a month. Any unused allowance will be carried from one month to the next.

For example, if your levy liability in month 1 is £1,000 you will not pay the levy and your allowance in month 2 will be £1,500.
If you have some unused allowance in a month, but paid the levy previously in the tax year, you can receive a credit which you can
use to offset against your other Pay as You Earn (PAYE) liabilities. The credit will also reduce the amount of levy paid. If you have multiple PAYE schemes and do not use the full £15,000 allowance, you will be able to offset the unused amount against another one of your schemes once the tax year has ended.

Example 1: an employer who would pay the levy
An employer with an annual pay bill of £5,000,000:
• levy sum: 0.5% x £5,000,000 = £25,000
• subtracting levy allowance: £25,000 – £15,000 = £10,000 annual levy payment

Example 2: an employer who would not have to pay the levy
An employer with an annual pay bill of £2,000,000:
• levy sum: 0.5% x £2,000,000 = £10,000

Levy Funds will expire after 24 months after they enter the apprenticeship online account unless they are spent within this time.

Accessing money paid under the apprenticeship levy

Levy-paying employers will be able to use the service to pay for the training and assessment of apprentices from May 2017. When you’ve registered, you’ll need to verify your Pay as You Earn (PAYE) schemes and link them to your online account. You will be able to use more than one account if you’d like to keep your schemes separate.

You will be able to see funds appear in your online account monthly, a few working days after you have confirmed your pay bill and levy contribution to HMRC for the previous month. This means that the first time you will see any funds in your account will be late May 2017.

The Government will apply a 10% top-up to the funds you have for spending on apprenticeship training in England. This will be applied monthly, at the same time the funds enter your online account. That means for every £1 that enters your account to spend in England on apprenticeships training, you will have £1.10 to spend.

Funds will expire 24 months after they enter your apprenticeship service account unless you spend them on apprenticeship training, this will also apply to any top-ups in your account. Money is spent when it leaves your account as a payment to a training provider.
The account will work on a first-in, first-out basis, through either payment or expiry. Whenever a payment is taken from your online account it will automatically use the funds that entered your account first. This will minimise the amount of expired funds.
This will happen automatically. Your account will let you know in good time when any funds are due to expire so that you can arrange to spend them if you wish.

Additional payments and incentives for Employers

CLC are committed to apprenticeship programmes that support young people into quality apprenticeships and we recognise that for employers who take on young apprentices aged 16 to 18 years old, there are some additional costs associated with supporting them in the workplace. For example, research on apprenticeships for 16-18 year old’s suggests that these apprentices can require significantly more supervision and pastoral care.

When employers take on a 16 to 18 year old on an apprenticeship framework or standard, they will receive £1,000 to help meet the extra costs associated with this. This will be paid to employers in two equal installments at 3 months and 12 months. Initially, these payments will be made to employers via their training provider, who will pass the money on.  These payments will come direct from the government and will not be deducted from an employer’s digital account.

All apprentices are required to have equal opportunity in the workplace and so employers who train an apprentice who is aged 19 to 24 and has previously been in care or who has a Local Authority Education, Health and Care plan, will receive £1,000 to help with these additional costs in the same way as the payment for 16 to 18 year old’s.

Apprenticeship training started before May 2017 – for all employers

Apprentices who have been accepted on to an apprenticeship programme before May 2017 will be funded for the full duration of
the apprenticeship under the terms and conditions that were in place at the time the apprenticeship started. This will be the case for apprentices following programmes underpinned by both apprenticeship ‘frameworks’ and new ‘apprenticeship standards’. If you pay the apprenticeship levy you will not be able to use the funds in your online apprenticeship service account to pay for these apprenticeships.


* Please refer to the Apprenticeship Levy and Funding booklet as per the link below:

Levy booklet for employers


Please contact our team for more information or if you would like a visit to discuss this in greater detail