All you need to know about the Apprenticeship Levy
In 2017 the government introduced the apprenticeship levy, a compulsory tax on employers to help fund the development and delivery of apprenticeships, with the aim of improving the quality and quantity of those available.
Employers fall into one of two groups...
1. Levy payers – those of you who have a payroll of more than £3 million per year. You guys are required to pay the levy whether you employ an apprentice or not. ‘Payroll’ includes all payments to employees that are subject to Class 1 secondary National Insurance Contributions, such as wages, bonuses and commission. You can then draw down on the money you have paid into the levy in order to pay for apprenticeship training,
2. Non-levy payers – those of you with a payroll under £3 million per year. You don’t have a levy fund to draw down on, however, there is still funding available!
So, for the levy payers amongst us…
You will be paying 0.5% of your salary bill into the levy. On a positive note, the government will top-up your levy pot by 10% on a monthly basis when funds enter your account (more about ‘your account’ in a moment).
Just as you pay Income Tax and National Insurance contributions, you pay the apprenticeship levy to HMRC through the PAYE system. Any overpayments you make during the year will be returned as a PAYE credit. If you run a limited company and you pay the apprenticeship levy it counts as a deductible expense.
The levy payments will go into an online Apprenticeship Service account, within which you will be able to manage your apprenticeship funding and delivery. You'll be able to see how much is in your account and allocate payments to providers of government-approved apprenticeships (we are one of those).
You can only use funds in your account to pay for Apprenticeship Training and Assessment for apprentices that work at least 50% of the time in England. Each apprenticeship standard (formally known as frameworks) carry a funding band maximum – the apprenticeship provider can tell you more about this.
If the costs of training and assessment go above the maximum allowed for in the funding band, you will need to pay the difference with other funds from your own budget.
You cannot use the funds in your account to pay for other costs associated with your apprentices – this includes wages, statutory licences to practice, travel and subsidiary costs, work placement programmes or the setting up of your apprenticeship programme within the business.
A word of caution, the funds in your levy pot don’t last forever! Any funds you have not spent will expire after 24 months…..use it or lose it!
If you are under the £3 million wage bill but you have more than 50 employees, then the government will pay 95% of the training cost with you having to contribute the other 5% - this is called co-investment. Similar to the levy payer, you will have to cover wages, statutory licences to practice, travel and subsidiary costs, work placement programmes or any fees required when setting up your apprenticeship.
If your wage bill is under £3 million and you have less than 50 employees, you won’t have to pay any contribution towards apprenticeships for 16-18-year olds (the costs highlighted above do apply). However, if any apprentice is 19 or older, you will be required to co-invest and contribute the 5% towards their apprenticeship training. If the apprentice is aged between 19 and 24 and has an Education, Health and Care Plan then the training will be fully funded.
Non-levy employers can now register for a digital account in the same way as a levy paying employer – your training provider should be able to help you with this, as we do with all the employers we work with. If your training provider doesn’t give you this sort of support, then you might be using the wrong one….!
Is that all you need to know?
Well from a nuts-and-bolts levy point of view yes. You are probably now thinking what do you have to pay an apprentice? What other costs are involved setting up the programme? If you are not a levy payer, what will that 5% cost me? All good questions and all questions we would be happy to answer for you, just give us a call.
Taking on an apprentice can bring a lot of positives to your business, secure your workforce of the future, give a young person the step up into a career or offer progression to someone you already employ.
Written by Melvyn, Operations Manager