Apprenticeship Levy

The following FAQs address some of the main questions about the Apprenticeship Levy. For more detail and the latest government guidance, which was last updated on 1st November 2021, see ‘Apprenticeship funding in England (from November 2021)’.

What is a Levy?

When we first heard talk of the ‘Levy’ we weren’t quite sure exactly what the word means if we’re honest. A quick search for ‘Levy definition’ brought up 3 different definitions:

1. an imposing or collecting, as of a tax, by authority or force
2. the amount owed or collected
3. the act of enlisting troops

You could say that there’s an element of all of those in the Apprenticeship Levy…

So what is the Apprenticeship Levy?

The Apprenticeship Levy is an amount of money that employers will pay towards the funding of Apprenticeships to help the government meet their target of 3 million Apprentices by 2020. It’s also intended to encourage increased commitment to Apprenticeships by employers, since they can use it - to fund their own Apprenticeship training – or lose it.

When was it introduced?

The Levy was introduced on 6th April 2017 and a new system for funding Apprenticeships began in May 2017.

Who has to pay it?

Every organisation with a wage bill of more than £3,000,000 pays the Levy. It applies to all industries in the UK, including public and voluntary sector organisations such as academies and charities.

That’s us… how much do we have to pay?

The Levy has been set at a rate of 0.5% of your annual wage bill, based on total employee earnings subject to Class 1 secondary National Insurance Contributions (NICs). The Levy won’t be charged on other payments such as benefits in kind.

So why £3,000,000?

The £3M wage bill is nothing to do with the 3M target for Apprenticeship starts - there is a reason for that figure…

The Levy applies to all employers. However, there is a £15,000 ‘allowance’ - or threshold for payment - which means that only organisations with a wage bill of over £3,000,000 will actually pay any Levy. These examples explain…

Employer 1: Annual wage bill = £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000
Since this is less than the £15,000 ‘allowance’, so this employer won’t pay any Levy

Employer 2: Annual wage bill = £3,000,000
Levy sum: 0.5% x £3,000,000 = £15,000
Since this equals the £15,000 allowance, this employer won’t pay any Levy either

Employer 3: Annual wage bill = £4,000,000
Levy sum: 0.5% x £4,000,000 = £20,000
£20,000 minus £15,000 allowance = £5,000 Levy to pay for this employer

How is the Levy collected?

The Levy is paid to HM Revenue and Customs (HMRC), through the Pay as You Earn (PAYE) process alongside tax and NICs.

How do I access the money I’ve paid into the Levy?

Levy funds are accessed via the Digital Apprenticeship Service (DAS) account, which you can to use to pay for Apprentice training and assessment in England. 

What’s this about government ‘top-ups’?

The government tops-up your funds by 10%. That means for every £1 that enters your digital account to spend Apprenticeship training, you get £1.10.

What can I spend my Levy money on?

It 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. It can’t be used on other costs associated with your Apprentices or other types of training, for example wages, travel costs, Traineeships, or the cost of setting up an Apprenticeship programme. See the full set of eligibility rules for more detail.

What happens if I don’t spend all my Levy money?

Funds in your digital account will expire after 24 months unless you spend them on Apprenticeship training!

Can I use it to fund Apprenticeships for other employers?

The government are aware that some employers would like to use some of their money to fund Apprenticeships for employers if they won’t use it all themselves, for example employers in their supply chain or an Apprenticeship Training Agency (ATA). They are planning to allow employers to transfer 10% of their funds to another employer’s digital account from 2018.

What happens if I spend too much?

If you spend more than your Levy on Apprenticeship training, the government will provide some support to help meet the additional costs, called ‘co-investment’, similar to the arrangements for employers who don’t pay the Levy – see below.

I don’t pay the Levy, so how will I access funding for Apprenticeships?

The government ‘co-invests’ in Apprenticeship training with employers that don’t pay the Levy i.e. you are required to make a contribution to the cost of the training and they pay the rest, up to a maxiumum amount of funding available for that Apprenticeship. The government contributes 90%, with employers paying the remaining 10%. 

You can use the registers available on the DAS to choose the training you’d like your Apprentices to receive, an approved training provider and an assessment organisation. 

What about small employers?

The government is supporting employers with less than 50 employees by paying 100% of their Apprenticeship training costs for 16-18 year old Apprentices and 19-24 year old Apprentices who have been in care or have a Local Authority Education, Health and Care Plan. 

Is there funding for employing Apprentices who need extra support?

The government have introduced payments for all employers and training providers to meet the extra costs of employing Apprentices aged 16-18 and also those who have additional learning needs or have been in care. They will also pay for any level 1 and 2 English or maths training required by your Apprentices. 

What will happen to existing industry Levies?

Some industries – such as construction and engineering – already operate Levy schemes. Employers paying those will still have to pay the Apprenticeship Levy. Industry Training Boards are consulting with their members and considering potential changes that might be needed to their current Levy arrangements.

This is your last FAQ but I’ve got more questions!

These FAQs are to give you the basics and help you get started. For more detail and the latest government guidance, which was last updated on 1st November 2021, see ‘Apprenticeship funding in England (from November 2021)’.