Apprenticeship Levy

From April 2017 the government is introducing an apprenticeship levy which has been set at a rate of 0.5% of the payroll. This will be payable on any wage bill over £3 million and can only be spent on apprenticeship training.

Moulton can support you to maximise the impact of your Levy contribution.

What levy?

Your annual pay bill is generally all payments to employees that are subject to employer Class 1 secondary National Insurance contributions (NICs) such as wages, bonuses and commissions.

You will calculate, report and pay your levy to HMRC, through the Pay as You Earn (PAYE) process alongside income tax and National Insurance. The levy will be paid into a digital apprenticeship account and the government will top up this account by an additional 10% allowing employers who pay the levy to be able to get out more out than they pay in.

You will not be exempt from the apprenticeship levy if you already pay into an existing industry training levy, for example the Construction Industry Training Board (CITB) levy, meaning you will be liable to pay both levies. There may be some transitional relief offered by the industry levy schemes in the first year as is the case with the CITB.

What can I spend the levy on?

Levy funds can be used for apprenticeship training and assessment, with an approved training provider and assessment organisation. Funds can be used for new recruits or to upskill existing staff who require new knowledge and skills to progress in their careers.

Funds cannot be used for:

  • wages
  • statutory licences to practice
  • travel and subsidiary costs
  • managerial costs
  • traineeships
  • work placement programmes
  • the costs of setting up an apprenticeship programme

Levy Paying Employer

Non-Levy Paying Employer

Employer of 250 employees, each with a gross salary of £20,000

Pay bill: 250 x £20,000 = £5,000,000

Levy sum: 0.5% x £5,000,000 = £25,000

Allowance: £25,000 - £15,000 = £10,000 annual levy payment

Employer of 100 employees, each with a gross salary of £20,000

Pay bill: 100 x £20,000 = £2,000,000

Levy sum: 0.5% x £2,000,000 = £10,000

Allowance: £10,000 - £15,000 = £0 annual levy payment

How can I access these levy funds?

Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through a new digital apprenticeship service (DAS) account.

  • Digital funds will enter the account monthly and will expire 24 months after entering the account unless they are invested in apprenticeship training.
  • Funds will leave the account in the order they are paid.
  • It will take careful planning to ensure that the levy funds are maximised

What if i run out of levy funds?

Should you wish to invest in more apprenticeships than are covered by your levy payments, each additional apprenticeship will follow the co-funding model.

This is where you would contribute 10% of the cost of apprenticeship training with the government funding the remaining 90%.

When can I access the DAS?

If you are likely to be affected by the apprenticeship levy it will be essential that you register for your digital account prior to these changes coming into effect and this process should be open in February 2017.

What is the cost of apprenticeship training?

From May 2017 there will be no fixed cost for training.

Employers will be able to negotiate training costs and content with providers to set up funding bands.

  • The upper limit of each funding band will cap the maximum amount of levy funds that can be used for each apprenticeship or the maximum that the government will ‘co-invest’ towards apprenticeship training.
  • Each apprenticeship will be placed into a funding band which will range from £1,500 to £27,000.
  • The majority of Moulton intermediate apprenticeships in the £1,500 to £6,000 band.

When considered in the context of the benefits that apprenticeships can bring to a business, this contribution should soon be recovered in increased productivity and filling essential skills gaps.