The purpose of the apprenticeship levy is to fund an increase in the number and quality of apprenticeships.
The government announced the levy in the Summer Budget 2015. In the 2015 Autumn Statement the government provided details of who it would apply to and how much the rate would be.
The apprenticeship levy will be introduced in April 2017.
Who the Levy Affects
The levy will apply to all UK employers in both the private and public sectors.
It is payable on annual pay bills of more than £3 million. Employers with an annual pay bill of less than £3 million will not pay the levy. These employers will continue to have access to government funding to support apprenticeships. In June 2016 the government will provide further details of what that support is expected to be.
Employers who Operate across the UK
The levy will apply to employers across the UK. This guidance applies to employers based in England.
The government is working closely with the devolved administrations in Scotland, Wales and Northern Ireland, where skills policy is devolved. Employers based in these countries should contact their national apprenticeship authorities for further information. The government is committed to making the system work for employers wherever they are in the UK.
How Much you Will Pay
The levy will be charged at a rate of 0.5% of an employer’s pay bill. Levy payments will be collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), payable alongside tax and National Insurance. Pay bill will be based on total employee earnings subject to Class 1 secondary National Insurance Contributions (NICs).
There will be a £15,000 fixed annual allowance for employers to offset against their levy payment.
Digital Apprenticeship Service
The money will be collected by HMRC. Individual employers’ funding for apprenticeship training in England will then be made available via a new Digital Apprenticeship Service (DAS) account. Employers will be able to use this to pay for training for apprentices. The service will also support employers to identify a training provider, choose an apprenticeship training course and find a candidate.The main functions of this service will be in place by April 2017.
The DAS will also enable employers to:
- select an apprenticeship training course
- choose the training provider or providers they want to deliver the training
- post apprenticeship vacancies
Who Provides the Training
Employers can only spend their levy funds on apprenticeship training delivered by an approved provider. This could be through buying in training from an approved provider or delivering the training themselves. To deliver training the employer would need to register as an approved provider and be subject to Skills Funding Agency (SFA) quality arrangements and Ofsted inspection.
Unused Levy Funds
The government wants employers to have the flexibility to pay for their apprenticeship training when it best suits their business needs. They also want to ensure that levy funds which are unused keep their value by reallocating them to committed employers, who can use them to fund more quality apprenticeship training.
Employers have 24 months to use their levy money before it is reallocated.
Why the Levy is Being Introduced
The apprenticeship levy will help to deliver the government’s commitment of 3 million apprenticeship starts by 2020. The levy will make apprenticeship funding sustainable. For the first time, employers will be in control of apprenticeship funding. The aim is to empower employers to get what they need from the training market.
Employer investment in apprenticeship training will improve the skills of their workforce and this will help their businesses to succeed and grow, and increase the UK’s productivity.