The Apprenticeship levy is a payroll tax on UK employers to fund new apprenticeships.
The levy is set at 0.5% of your salary bill, this includes wages, bonuses, commissions, and pensions contributions paid monthly through PAYE.
The Government says that any UK employer, in any sector, with a pay bill of more than £3 million per tax year will pay the levy on a total pay bill over £3 million. However, the levy will be a monthly deduction, so in reality these costs will be taken in any month where your pay bill is over £250,000. If your pay bill in that tax year is below £3 million any levy deductions will be reimbursed.
You will hear talk of an ‘allowance’ of £15,000 per tax year offset against your levy liability. This means that you will only make levy payments on your pay bill in excess of £3 million per tax year. This ‘allowance’ is available on a monthly basis.
Employers in England who pay the levy and participate in apprenticeship programmes will receive more than they pay into the levy, through a monthly 10% top-up to their digital account.
Extra support for 16-18 year olds
When you take on an apprentice who is aged between 16-18 at the start of their apprenticeship, you will receive a payment of £1,000 to help meet the extra costs of employing them via your training employer.
Do I have to pay it?
The levy is currently only for employers with a payroll of £3 million and above. For example:
Employer of 100 employees, with an average gross salary of £20,000
Pay bill: 100 x £20,000= £2,000,000
Levy entry point: = £3,000,000
£0 annual levy payment
The non-levy paying employers will simply pay an agreed Employer Contribution with the remaining balance co-funded by the Government. This is set to be 90% funded by the Government with a nominal contribution of 10% from the employer.
Using your levy payments
Levy payments will ‘expire’ 18 months after they enter your account. They will be on a ‘first in, first out’ basis, so the sooner you become engaged with apprenticeships the better. The Government calls this ‘sunsetting’.
Our Business and Performance Manager Joanne Cronin has gained a wealth of knowledge and understanding of the changes to apprenticeship funding, the introduction to the levy tax for non and levied employers and the impact on your business of frameworks moving towards standards.