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Apprenticeship levy: What is it and how will it work?

In April 2017 the way the Government funds Apprenticeships in England is changing. A new Apprenticeship Levy will be implemented and is a new Payroll tax on UK employers designed to support the creation and funding of three million Apprenticeships by 2020.

Below are some of the Key facts you will need to know to prepare yourself for the changes:

  • The levy will apply to any company where the salary bill is £3 million or more regardless of whether they already employ Apprentices or not
  • The Levy will be a monthly deduction, taken in any month where your salary pay bill is over £250,000
  • The first levy payments will be due in April 2017 and will be paid through Pay As You Earn (PAYE)
  • The rate for the levy will be set at 0.5% of an employer’s entire salary pay bill
  • Employers will receive an allowance of £15,000 per tax year to offset against levy liability
  • Employers who pay the levy and participate in Apprenticeship programmes will receive more than they pay into the levy, through a monthly 10% top-up from the Government
  • The levy payment can be then be ‘spent’ in the form of an electronic voucher using a new Digital Apprenticeship Service (DAS) that can be used to purchase Apprenticeship training from Croydon College
  • Companies who pay the levy will need to use the funds from their digital account within ​24 months or they will lose the digital ‘training vouchers’ irrespective of paying the tax.
  • Employers with a pay bill less than £3m will not pay anything into the Apprenticeship Funding Pot and will employ Apprentices through a co- investment scheme

The levy will be collected from all employers by HMRC through the PAYE process alongside National Insurance and Income Tax, and placed into the Apprenticeship Funding Pot. The only way that employers can then ‘spend’ this money is by offering Apprenticeship training to new or existing staff within their business.

Examples of Levy calculations:

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

Minus 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

Minus levy allowance:

£10,000 - £15,000

= £0 annual levy payment

Funding Bands

In line with the Apprenticeship Levy the Government have simplified the apprenticeship funding system.

  • The new funding system will be made up of 15 funding bands, with the upper limit of those bands ranging from £1,500 to £27,000 (see calculator below for the bands).
  • All existing apprenticeship frameworks and standards have been placed within one of the 15 funding bands.  New standards will be placed in a funding band as they become ready for use by employers.
  • To view what funding band a particular framework or standard has been placed in please click on the following Skills Funding Agency resource link

What happens if I do not have to pay an Apprenticeship levy bill?

Employers with a salary bill less than £3 million per year (98% of employers nationally) won’t pay the levy but can still employ Apprentices or train existing staff on an Apprenticeship programme. 

You will be able to access government support and funding for the Apprentice through a ‘co-investing scheme’, and make a financial contribution towards the cost of any Apprenticeship training.

  • The Skills Funding Agency will pay 90% of the maximum funding band rate on condition the employer has paid 10% in cash first
  • Contribution rates will be based on the 15 new funding bands
  • The government will encourage employers with less than 50 employees to take on 16-18 apprentices by covering all training and assessment costs.
  • The government will pay £1,000 to any employers who train a 16-18 year old apprentice.

Use our online calculator below for employers to estimate your levy contribution, begin to plan your training requirements, and estimate your financial spending.

 

Enter your annual payroll

Over £3,000,000

Your levy payment

The annual amount you will pay.

£0

Your levy pot

The annual amount you will have to spend on Apprenticeship Training (includes Government 10% top-up).

£0

Monthly Levy Payments

Approximate Monthly Levy Payment starting April 2017.

£0

Number of Apprentices

Estimated number of existing or new employees that could be trained with your levy pot according to the 15 funding bands* (see details about bands above).

Funding band Funding cost No Apprentices
1 £1,500 0
2 £2,000 0
3 £2,500 0
4 £3,000 0
5 £3,500 0
6 £4,000 0
7 £5,000 0
8 £6,000 0
9 £9,000 0
10 £12,000 0
11 £15,000 0
12 £18,000 0
13 £21,000 0
14 £24,000 0
15 £27,000 0

*Please remember you will be able to use co-funding to cover any additional Apprenticeship training not covered by your Levy pot.

View all funding bands

Contact us

If you would like to take on an Apprentice, upskill your staff or have any questions at about the Levy please contact our friendly and knowledgeable Apprenticeship Team on:

Tel: 0800 652 0784
Email: employers@croydon.ac.uk

You are also welcome to drop into the College Apprenticeship Hub to the right of the main College entrance. It's open Monday to Friday, 9.00am-5.00pm.