Apprenticeship Levy
The Apprenticeship Levy is a government initiative that your business can use to fund apprenticeship training at no extra commercial cost.
By ringfencing money especially for apprenticeship training, the Levy is designed to boost skills and training provision.
You can use your Apprenticeship Levy to fund upskilling and reskilling apprenticeship training for your employees.
Multiverse can help you to identify your skills gaps, craft a Levy strategy, and select the best fit apprenticeship programmes for your workforce.
Funds in your apprenticeships service account can only be used towards the costs of apprenticeship training and spent with an approved training provider.
Currently, they cannot be used to pay for other costs associated with your apprentices or wider training effort e.g. pay, statutory licences to practise, travel and subsidiary costs, managerial costs, or the costs of establishing an apprenticeship programme.
Businesses will soon have greater flexibility over how they choose to spend Levy funding, with the 2024 Labour government proposing an expanded ‘Growth and Skills Levy’ – though the finer details of this are yet to be confirmed.
Yes – the 2024 Labour government plans to reform the Levy as part of the work of a new body, Skills England.
The proposed changes include giving employers greater flexibility on how funds are spent – you can read more on what we know so far about the Growth and Skills Levy in our explainer.
The Apprenticeship Levy is effectively an additional payroll tax, set at 0.5% of an employer’s annual pay bill, collected through PAYE – and applies to all UK employers with an annual pay bill of more than £3 million.
Groups of companies under a common ownership structure will be treated as one business. Any Apprenticeship Levy payment to HMRC is an allowable deduction for Corporation Tax purposes.
Your pay bill is based on the total amount of earnings subject to National Insurance Contributions.
Essentially, any person who is on your payroll and paid through PAYE is included in your pay bill.
Earnings include any remuneration or profit coming from employment, such as pay, bonuses, commissions, and pension contributions that you pay National Insurance on.
While the Levy is set at 0.5% of an employer’s gross annual pay bill, employers have an allowance of £15,000 that reduces the overall amount they have to pay.
So, if an employer has a pay bill of £10 million, they will end up paying an annual fee of: £10 million x 0.5%, minus £15,000 = equals £35,000 to pay.
The Apprenticeship Levy allowance operates monthly and accumulates throughout the year, giving you an allowance of £1,250 every month. Any unused allowance is carried from one month to the next, however, this cannot be carried into the next tax year.
If you are part of a group of employers, you must decide what proportion of the Apprenticeship Levy allowance each employer in the group will be entitled to. This decision must be taken at the beginning of the tax year and will be fixed for that tax year. Each employer will then calculate what they have to pay through the same processes set out above, but using their portion of the £15,000 allowance.
After HMRC collects monthly Apprenticeship Levy contributions, the funding is made available to employers via a digital account, through which they can pay for training for apprentices.
If an employer does not spend their entire Levy amount on apprenticeships, then the unspent portion will be made available to other employers to spend on apprenticeships.
First announced in the 2015 November Spending Review, the Apprenticeship Levy was introduced in April 2017.
First announced in the 2015 November Spending Review, the Apprenticeship Levy was introduced in April 2017.
If your business decides it doesn’t need to utilise its full Levy pot, it can choose to donate up to 50% of its fund to other organisations, through the Apprenticeship Levy transfer scheme.
By transferring funds to small businesses, charities, or other organisations, you can help them pay for much-needed apprenticeship training and skills development.
For more information speak to our team.
Some employers paying the Levy may find the funds in their apprenticeships service account aren’t enough to cover the full cost of training all the apprentices they want to take on.
To help bridge the gap, the Government currently contributes 95% of the total costs of any additional delivery up to the funding band maximum for each apprenticeship. If you exceed the funding band maximum, you pay the extra costs.
Every apprenticeship standard and framework is placed in a funding band, which set the maximum amount of funding that can be used towards training costs over the length of the apprenticeship. As of April 2024, the bands range from £1,500 to £27,000. The same funding bands apply to all employers paying for apprenticeships.
The government will apply a 10% top-up to your Levy account for spending on apprenticeship training in England. It applies the top-up monthly, at the same time the funds enter your digital account.
For every £1 that goes into your apprenticeship training digital account, you will get £1.10 to spend.
Funds (including top-ups) expire 24 months after they enter your digital account unless you spend them on apprenticeship training.
If you do not pay the Levy, you cover 5% of the cost to train and assess your apprentice – with the government paying the rest (95%) up to the funding band maximum. Payments will still need to be managed through your apprenticeships service account.
No – all contributions are covered by the employer, set at 0.5% of its gross annual pay bill, minus the £15,000 annual allowance.
Checklist
If your annual pay bill is more than £3 million, work out your monthly levy contributions by calculating 0.5% of your gross annual payroll and divide by 12. If Levy payments apply to you, the funding to spend will be in your apprenticeships service account.
Identify across your business where there’s a need for upskilling, and consider how apprenticeship programmes could help to develop employee tech, data, and AI skills.
If you’ve never offered apprenticeships to your teams before, start small with a pilot scheme – launch a small cohort of learners and trial the process internally.
Approximately three months after recruiting your first apprentices, assess the progress of the programme and the impact the apprentices are having.
Now you’ve found the right approach, you’re ready to expand by launching larger cohorts and additional apprenticeship programmes.
Your programme’s working, you’ve expanded it; what next? Look at growing the apprenticeships you offer and develop progression routes for employees.
Get in touch with our team to help build a Levy funded upskilling strategy