How it works | Apprenticeship Levy | Top 5 things to know | Levy is good for employers | FAQs

How it works

The apprenticeship funding rules differ depending on your employee size and wage bill. Whatever your business size is, HRUC Apprenticeships & Skills can help you to understand apprenticeship funding and advice on how you can maximise it to benefit your business.

If you are unsure about how the funding works, call now to find out more from one our experienced Account Managers today: 01895 853780 

EmployerYou payGovernment paysIncentive payments
Levy paying employer (£3m pay bill) The cost of training from your digital account.
10% for any additional training.
Any fees over the standard funding cap.		 90% of any fees your digital account will not cover within funding band cap
£15,000 allowance per annum (paid monthly).		 £1000 for each 16-18 year old apprentice or 19-24 year old with a care plan or care leaver
Non-levy paying employer (50+ employees) 5% of any apprenticeship training.
Any fees over the standard funding cap.		 95% of any apprenticeship training fees within the funding cap. £1000 for each 16-18 year old apprentice or 19-24 year old with a care plan or care leaver
Non-levy paying employer (fewer than 50 employees) 0% of any apprenticeship training for 16-18 year olds & 19-24 year olds with a care plan or a care leaver.
5% for 19+ year old apprentices.
Any fees over the standard funding cap.		 100% any apprenticeship training fees for 16—18 year olds & 19 year olds with a care plan or a care leaver.
95% for other apprentices within funding cap.		 £1000 for each 16-18 year old apprentice or 19-24 year old with a care plan or care leaver

 

Use the Government's Calculator to work out if you will pay the levy. 

Apprenticeship Levy

The government introduced a levy to fund apprenticeships in England for employers with a wage bill of over £3 million. The idea is to encourage the levy paying employers to uptake more apprentices to meet their current and future skills needs.

Top 5 things you need to know

  1. Employers with a pay bill of £3m or more pays the levy
  2. The levy is at a rate of 0.5% of the total annual pay bill and will be paid through Pay as you Earn (PAYE) process
  3. Levy funds are accessed through the Digital Apprenticeship Service (DAS) – where employers can register for an online account
  4. Funds appear in the account monthly and government applies a 10% top up payment to use towards the cost of the apprenticeship training and assessment
  5. Levy and the quality apprenticeship standards will be overseen by Institute for Apprenticeships & Technical Education.

The levy is good for employers - and we can help you to maximise it!

  • Recruit new staff to improve your bottom line and maximise your levy
  • Progress existing staff in development and leadership programmes or sector specific CPD skills
  • Inject productivity - in many sectors, apprentices can deliver productivity gains of more than £10,000 per year
  • Be in control about how to maximise the industry focused training programmes to meet your business needs.

Frequently asked questions 

Still confused about Apprenticeship Levy? Read below for further information on questions employers usually ask us or contact our team: 01895 853622 or This email address is being protected from spambots. You need JavaScript enabled to view it.

  • What is the Apprenticeship Levy?

    The government has announced Apprenticeship Levy on employers with an annual wage bill of more than £3 million to increase their contribution towards staff training. By allocating a specific amount of funds that can only be spent on apprentices, the government is encouraging businesses to make use of the money they essentially contributed as part of the levy.  In order to make some of that money back, they will have to make use of it by training apprentices.

  • Who will need to pay the apprenticeship levy?

    Employers in the UK that have a wage bill of over £3 million will need to pay the levy. The levy applies to all industries in the private and public sectors.

  • What counts as the ‘pay bill’?

    The pay bill is defined as ‘total employee earnings’ of every employee per year. It is calculated based on the total amount of earnings subject to Class 1 secondary NICs. Earnings include any remuneration or profit coming from employment such as wages, bonuses, commissions, and pension contributions that you pay on NICs on.

  • How is the ‘LEVY’ calculated?

    The levy is at a rate of 0.5% of the pay bill.

    Every employer is given a £15,000 annual allowance, which will be dispersed monthly. This allowance is easiest explained with an example:

    Example One: An employer with an annual pay bill of £2,000,000

    Levy sum: 0.5% x £2,000,000 = £10,000 = £0 annual levy payment (the total amount of the levy sum is less than the £15,000 allowance)

    Example Two: An employer with a pay bill of £5,000,000

    Levy sum: 0.5% x £5,000,000 = £25,000 (Minus levy allowance of £15,000) = £10,000 levy to pay annually

    NB:There will be a connected person’s rule so employers who operate multiple payrolls will only be able to claim their £15,000 allowance once.

  • How to calculate ‘levy allowance’?

    The levy allowance will operate monthly, accumulating throughout the year.

    Monthly Levy Allowance: £1,250

    Example:
    Employer with Levy liability in month 1 of £1,000

    Monthly Levy Allowance:
    £1,000 - £1,250 = (£250)

    £250 will be carried forward to the next month and the employer would not be liable to pay the levy in month 1, therefore making the levy allowance for month 2 at £1,500.

  • How will the government collect the levy?

    The levy is collected through the employers Pay as You Earn (PAYE) Scheme and is payable alongside income tax and national insurance.

  • What can I spend levy funds on?

    Funds in your digital account can only be used towards the costs of apprenticeship training and end point assessment. This must be with an approved training provider and assessment organisation.

    Funds can’t be used on other costs associated with apprentices or wider training effort, e.g. wages, statutory licences to practise, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or the cost of setting up an apprenticeship programme.

  • How do I access my levy fund?

    You can access your funds through a new online Apprenticeship Service account. Employers will need to register to create an account, and link it to their PAYE schemes. They will be able to see funds appear in their digital account monthly and will be able to use this to pay for training and assessment for apprentices in England. The service will also help employers find training providers and assessment organisations. Employers are free to choose their training provider (e.g. their local college or other training provider) from those on the Register of Providers and discuss their needs and delivery.

    When you agree to buy apprenticeship training from a particular training provider and the apprenticeship has started, monthly payments will automatically be taken from your digital account and sent to the provider.

    If an employer wants to take on more apprentices than the value that their levy contribution will cover, they will be able to apply for ‘top-up’ payments.

  • How do the top-ups work?
     

    The government will apply a 10% top-up to the funds you have to spend on apprenticeship training in England. It will be given monthly, at the same time the funds enter your digital account. That means for every £1 that enters your digital account to spend in England on apprenticeship training, you get £1.10.

    Funding caps will be set on different standards/ frameworks. For each apprentice an employer takes on, the employer can obtain a voucher up to the value of the cap for that particular apprenticeship standard.

  • Can I use the allowance to offer apprenticeships to both new and existing staff?
     

    Yes, you can recruit new staff of train existing staff for an Apprenticeship, as long as it is relevant to their role or progressing them on to different areas to develop new skills.

  • Will my funds expire if I don’t use them?
     

    Funds will expire 24 months after they enter your online account if you don’t spend them on apprenticeship training – this will also apply to any top-ups. Your digital account will let you know in good time when any funds are due to expire so that you can arrange to spend them.

  • What will happen to apprentices that started before April 2017 but are still on programme?
     

    All apprentices who started their apprenticeship programme before April 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. If you pay the apprenticeship levy, you will not be able to use the funds in your digital account to pay for these apprenticeships.

  • How should I calculate net costs to my business?

    When calculating net costs to your business of the levy, take account of:

    • The levy allowance of £15,000 per tax year
    • The 10% top-up payments applied monthly
    • NI savings that come into effect from April 2016 related to apprentices under the age of 25
    • Employer incentives for apprentices aged 16-18
    • Funding caps applied to the apprenticeship standards relevant to your apprentice programmes.

  • How can I use the online apprenticeship service?

    Employers can use the online apprenticeship service whether they pay the levy or not. They will help employers to:

    • Select an apprenticeship standard
    • Choose the training provider or providers you want to deliver the training
    • Choose an assessment organisation
    • Post apprenticeship vacancies.

    Employers who pay the levy will also be able to:

    • see the funds available to spend in England
    • set the price agreed with your training provider
    • pay for apprenticeship training and assessment through the digital apprenticeship service

     By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships.

  • Companies that don’t pay the apprenticeship levy fund apprenticeships?

    If you don’t pay the levy, you won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment.

    However, you can access the digital apprenticeship service to choose the training provider, and assessment organisation for your apprenticeship programme using the registers available.

    Employers that don’t pay the levy will be expected to contribute 10% towards the cost of apprenticeship training (where applicable), and Government will pay 90% of the funding available in the band for that apprenticeship.

    You will pay this directly to the provider and you will be able to spread it over the lifetime of the apprenticeship, to a schedule you agree. As both you and the government make a payment, it’s called ‘co-investment’.

    Read the Government guidance in full here