Apprenticeship Levy explained

Every employer with an annual pay bill of more than £3m has to pay an Apprenticeship Levy each month. They can then access these funds to pay for Apprenticeship training and assessment of their staff.

Most employers don’t pay the Levy as their pay bill is less than £3m. Instead they must pay 10% of the cost of Apprenticeship training and assessment for staff aged 19 and over. Employers with less than 50 employees who recruit a 16 to 18 year old apprentice will have 100% costs of Apprenticeship training and assessment paid for by the Government.

Government funding available

The Government will pay employers an extra £1000 for every 16 to 18 year old apprentice they recruit. Also, the Government will pay an additional £1000 to an employer for every 19-24 year old apprentice they recruit who is leaving care or who has a Local Authority Education, Health and Care plan.

How to work out your annual pay bill

An employer’s annual pay bill is classed as payments to employees subject to employer Class 1 secondary NICs such as wages, bonuses and commissions. A tpm advisor can explain exactly what needs to be included when calculating your annual pay bill, and what can be omitted.

How much do employers need to pay?

Employers have an Apprenticeship Levy allowance of £15,000 each year. This reduces the amount they have to pay annually by £15,000. Connected companies or charities have one £15,000 allowance to share between them. Apprenticeship Levy is charged at 0.5% of an employer’s annual pay bill. Any unused allowance cannot be carried into the next tax year. The Levy is paid each month through the PAYE system in the same way income tax or NI contributions are made.An employer can use the Levy funds they have paid to cover costs for Apprenticeship training of their staff. The funds can be accessed through an online Apprenticeship Service Account.

The Government tops up employer Levy payments by 10%.

A tpm advisor can help you work out exactly how much you need to pay each month.

How can tpm help?

For no charge, we will:

  • Advise on how to work out your annual pay bill
  • Help you work out your monthly Levy payments if you are a Levy payer
  • Handle administration associated with your 10% contribution to Apprenticeship training if you don’t pay the Levy
  • Ensure you get any additional Government funding you are entitled to when recruiting eg for 16 to 18 year olds
  • Keep you updated with changes to Government funding relating to apprenticeships
  • Tell you how to set up your Apprenticeship Service account