What is the apprenticeship levy?

Since April 2017, apprenticeships have changed with a new Government funding model.

Employers with an annual pay bill of more than £3m are now charged a levy of 0.5%. Levy money can be used by employers to buy apprenticeship training for employees at all ages and levels. Organisations of any size, in any sector, can also access funding.

An apprenticeship is funded now based on employer annual payroll, with two main groups:

• More than £3 million: Levy paying
• Less than £3 million: Non-levy paying or co-investor employers

It is paid monthly with income tax and national insurance contributions. Funds are to be used exclusively for apprenticeship training and funding expires if not used within 24 months. Employers that are levy paying can transfer 25% maximum of annual funds to another employer for apprenticeship training.

How does the levy work for employers?

The apprenticeship levy works for employers through HMRC via the normal PAYE process. Monies are held in a digital fund through which you can pay for apprenticeship training.

The Government makes a 10% contribution to each monthly payment, so for each £1 you make as an employer, you will have access to £1.10 in the training fund. You will receive apprenticeship levy funding in the form of vouchers to invest in appropriate training.

• Find out how to pay the apprenticeship levy
• View the HMRC apprenticeship levy manual.

Levy explained for levy payers: Payroll more than £3m

• You can create an apprenticeship levy digital account, which is an online portal service that allows you to view, organize and spend funds on eligible apprenticeships approved by The Education and Skills Funding Agency (EFSA)
• Levy payments are ringfenced in the form of digital vouchers and spent by selecting a training provider through the Apprenticeship Service and authorizing payment
• Apprenticeship levy funding is available for existing and new staff provided they meet the apprenticeship criteria
• The government offers an ‘apprenticeship levy allowance’ of £15,000 designed to offset levy payments, so you have extra money on account
• If funds in your digital account fall short to cover the cost of training all your apprentices, the Government will support 95% of the training cost for extra apprentices, while you pay a 5% contribution.

Levy explained for non-levy payers: Payroll less than £3m

• If you are a non-levy fund paying employer or co-investor employer, you can fund an apprenticeship through which you pay 5% contribution to the training cost. The remaining 95% cost of training will be funded by the Government up to a maximum funding amount for the respective apprenticeship standard
• Your apprenticeship training provider will access funds directly from the Government and invoice you 10%, if applicable
• As a co-investor employer, you should create an apprenticeship service account to reserve funding and to support you in selecting a training provider such as City before an employee starts an apprenticeship. You can also contact City for advice on how to arrange funding
• Co-investor employers will start paying the levy if at any point annual payroll hits or exceeds £3m.

Contact us

• Apprenticeships team

  +44 (0)20 7040 0000

  apprenticeships@city.ac.uk

  City, University of London Northampton Square London EC1V 0HB United Kingdom

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