What is the apprenticeship levy?

Helping apprentices to flourish in the modern era

First published on Thursday, Jun 25, 2020

Last updated on Friday, Jun 14, 2024

Recently our articles have looked into why apprenticeships are a good idea for your business.

From employing an apprentice to also considering how much you can pay them, it’s a surprisingly complex decision.

And that’s why you should take into consideration the Apprenticeship Levy.

If you’re already wondering what that is, let’s stop you right now and take your through it all in this article.

The UK apprenticeship levy Explained

Its introduction came about due to the Conservative government in the July 2015 budget. It’s now also in Part 6 of the Finance Act 2016.

Putting it simply, it’s a UK tax on employers for funding apprenticeship training.

The goal of the tax is to improve the quality and quantity of the apprenticeships available. As an employer, you’ll fall into one of two groups.

  • Levy payers: As of 2018/2019, you have to pay this if you’re an employer with a yearly pay bill of more than £3 million (at a rate of 0.5% of your total bill). You must also pay this tax whether you employ an apprentice or not.
  • Non-levy payers: If your pay bill falls below the £3 million total, then your business doesn’t have to pay the tax.

Paying for the levy

Despite the pay bill of £3 million, all employers paying will receive a £15,000 apprenticeship levy allowance as a way to offset the amount they pay.

And your bill includes all payments to staff members who have Class 1 Secondary National Insurance contributions. This means the likes of:

There are apprenticeship levy funding bands you should keep in mind, too. They set out the funding that applies for current apprentice frameworks and standards.

Online apprenticeship service

Payments to the levy go into the government’s apprenticeship service. If you follow that link, you’ll find an apprenticeship levy login—a service account where you can go to register.

If you already have a Government Gateway user ID then you’ll be able to get this from your payroll or HR department. If you don’t have the ID yet, then you’ll need to setup an account.

Through this, you’ll be able to access funds to pay for apprenticeship training.

Estimate your apprenticeship funding

If you’d like to work out roughly how much you’re contributing towards this

There is an apprenticeship levy calculator of sorts, you can make a funding estimate using this link. Through that, you’ll be able to:

  • See how much you’ll pay in the levy.
  • How much you’ll have available to spend on apprentices.
  • Work out if the government will contribute towards training costs.

As some apprenticeship levy guidance, just remember that before you start, you can save time if you already know the percentage of your pay bill that goes to your English employees.

If you know the type of training for apprentices you’re looking for, then that will also save you some extra time.

And if you pay for the apprenticeship levy, then you’ll have to refer to your payroll department again to understand the total you are going to pay. That’s on a monthly basis.

HMRC apprenticeship levy contributions come from PAYE. But you can also work with your payroll team to make a plan for how to spend your levy budget.

Similarly, you should refer to your HR team about your strategy regarding apprenticeships.

In terms of how much you’ll receive each month, you require the following calculations:

  • How much levy you declare through PAYE each month.
  • Then a multiplied segment of your pay bill that’s made to your British workforce.
  • Finally, a 10% top-up from the government on your total.

How do the payments work?

For apprenticeship accounts there’s a set process you need to follow each month:

  • 19th of every month, it’s required you declare your levy to HMRC.
  • 23rd of the month, the funds appear in your account.
  • Fourth working day of the next month, approve an apprentice. This will release funds.
  • By the fourth day of the following month, training providers will supply an Individualised Learner Record (ILR). This will explain the training that’s gone ahead.
  • Around the fifth working day of the month, you’ll see the release of the funds in your account.
  • On the 11th working day, training providers receive the funds from the ESFA.

Make sure that your HMRC declarations are in for review by the 19th of each month, otherwise the above process may face disruption.

You can also stop the payments if the apprentice fails to start working with you or leaves shortly after starting.

But you can also pause the payments temporarily—should you need to. After you pause them, payments resume from that point onward.

What if you’re not paying the apprenticeship levy?

You won’t use the apprenticeship service available. You’ll be in direct contact with a training provider about the apprenticeship framework you use.

With this set up, you pay 10% towards training and assessment costs.

The British government pays the rest—the remaining 90%—to your training provider. As such, you’ll have to agree a schedule of payments with the provider you choose.

You’ll also have to pay them directly for all training that they provide you with.

After registration

Once you’re set up on the apprenticeship service, and if you pay the levy, then from within the service you can:

  • Sign your ESFA (Education and Skills Funding Agency) agreement.
  • Add PAYE schemes for apprenticeship funding.
  • Update your training providers.
  • Invite other colleagues to view your account details.
  • Update your list of apprentices.
  • Request your training provider to update your apprentice list.
  • Search through a database of apprenticeships and training providers.
  • Manage your transaction history.
  • Transfer funds from your annual amount to other businesses.

The service lets you work closely with training providers to ensure that funds, deadlines, checks, and agreement on apprentices are all accurate each month.

Do you need more help?

The apprenticeship levy can be difficult to get your head around. Thankfully, you can get in touch with BrightHR for immediate assistance. Call us now on: 0800 783 2806.

Thea Watson

Chief International Growth and Marketing Officer

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