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Apprenticeship Levy

Apprenticeship Levy

About the Levy

Our Apprenticeship Levy page is to help you understand all you need to know about the Apprenticeship Levy, how it affects your business and how to ensure that your employees have the right skill sets to benefit your business.

The launch of the Apprenticeship Levy has been designed to encourage employers to use apprenticeship programmes, either for new staff or to upskill an existing workforce, and help reduce the skills gap within the UK’s workforce. The Apprenticeship Levy will be applied to all industries in the UK.

The Levy was first announced by the Chancellor, George Osborne, in the November 2015 budget. He said: “By 2020, we want to see 3 million apprentices. Today I am setting the levy rate at 0.5% of an employer’s pay bill. Every employer will receive a £15,000 allowance to offset against the levy – which means over 98% of all employers – and all businesses with wage bills of less than £3m – will pay no levy at all. Britain’s Apprenticeship Levy will raise £3bn a year. It will fund 3 million apprenticeships. With those paying it able to get out more than they put in.”

Apprenticeships are a proven way of delivering real benefits to both businesses and learners. They give you access to new and talented employees who want to learn and progress and are an effective way to support your skills requirements.

Route map - How it works

  • Step 1

    HMRC collects the levy payment monthly through PAYE

  • Step 2

    Funds in Digital Apprenticeship Service (DAS) account. The government top-up your levy pot with a further 10% of funding

  • Step 3

    Member of staff joins apprenticeship programme

  • Step 4

    Apprentices receive their training and assessments

  • Step 5

    Monthly deductions from DAS account

  • Step 6

    Any unused levy funds expire after 24 months

Calculate what you will pay

The levy will only impact your business if you have a wage bill of over £3m, which is based on the total amount of earnings subject to Class 1 secondary employers NIC.

Each employer will have an allowance of £15,000 to offset against their levy payment and the levy will be deducted on a monthly basis, where your pay bill is over £250,000.

Calculate how much your levy payment will be for your business by using our levy calculator.

What is the company's annual wage bill?

Levy Sum: 0.5% x (wage bill) = £

Subtracting levy allowance: £ - £15,000

Annual levy payment: £

Examples of what you might pay

Employer A

Employer A has 250 employees, who each earn £20,000
The employer will have a pay bill of £5,000,000
The government will take 0.5% of £5,000,000 totalling £25,000
The employer receives a £15,000 allowance to offset against the levy
The total annual levy payment would be £10,000

Employer B

Employer B has 100 employees, who each earn £20,000
The employer will have a pay bill of £2,000,000
The government will take 0.5% of £2,000,000 totalling £10,000
The employer receives a £15,000 allowance to offset against the levy
The total annual levy payment would be £0

Frequently Answered Questions (FAQ)

Apprenticeships can be used to upskill your current workforce or to recruit new employees. Apprentices cannot have a qualification above Level 4 (i.e. anyone with a degree or higher) and must have been a resident in the EU for the past three years.

Learners must be employed on a full-time basis with a minimum salary of £3.30 per hour, however you are able to offer higher wage packages if you wish.

The levy will begin from April 2017 and will be collected on a monthly basis, based on ‘live’ HMRC payroll data.

There are certain employers who will be required to contribute towards the cost of their apprenticeship training outside of the levy system, such as those whose pay bill is less than £3m per tax year.

If your business fits this criteria, you will be required to co-invest a small proportion of funding towards the cost of apprenticeship training. The government will contribute a large proportion of funding, which will cover a large percentage of the costs of apprenticeships training.

If you are a non-levy-paying employer, you will still need to pay for your apprenticeship training to co-fund it but it will not be collected by HMRC, the proposals are that for every £1 the employer puts in the government matches this with £9.

The vouchers will last for 18 months from the time they appear in your digital account. If they are not spent within this time, they will expire.