In April 2017, the Government made substantial changes to funding for apprenticeship programmes. Since then, employers with an annual UK payroll bill in excess of £3 million pay the equivalent of half a percent of the excess into their own dedicated apprenticeship service account.
Who pays the Levy and how much is it?
All public and private sector organisations based in the UK are in-scope. However, currently only those with an annual payroll bill in excess of £3 million pay the Levy. The calculation for Levy payment costs are the organisations total employee earnings subject to class 1 secondary NI contributions. All organisations within England, Wales, Scotland and Northern Ireland whose payroll bill meets the criteria must pay the Levy.
How is the Levy paid?
HMRC collect Levy payments through the PAYE process in the same way as tax and National Insurance contributions. Employers calculate the amount of Levy needed, based upon the previous month’s payroll bill and must declare this to HMRC. They will then collect the Levy, with other payroll taxes, and transfer this to the employers’ apprenticeship service account.
Employers are responsible for setting up their own apprenticeship service account. Someone in the payroll department does this using the employers Government Gateway account. If your company does not have an apprenticeship account, or struggles to to set one up, UCQ can help.
How much will I have to spend?
The amount you will spend will comprise of your Levy payments plus a Government top up of 10%. Levy payments will be equivalent to 0.5% of your company’s UK payroll cost over £3 million per annum. Broadly speaking this equates to a Levy payment of £5000 for every £1 million of qualifying payroll cost. As an example, an employer with an annual UK payroll bill of £10 million could expect to pay £35,000. The Government will top this up by 10%, which means the total value of funds available will be £38,500.
What if my organisation doesn’t pay the Levy?
Smaller organisations that don’t pay the Levy can still register with the apprenticeship service and participate in this initiative, albeit with two primary limiting factors. The first limitation is that you will be required to “co-fund” any programmes you wish to run; currently (30.04.2021) government will contribute 95% towards the cost, and the employer the remaining 5% – an exception to this approach is where a large Levy paying employer agrees to transfer some of their unused funds (up to a maximum of 25%) to your organisation, in which case 100% of the cost can be covered.
We appreciate that the Apprenticeship Levy and eligibility for apprenticeship funding can be quite confusing, so get in touch if you have any questions.
What is the Apprenticeship Levy?
Substantial changes to how apprenticeship programmes in the UK are funded, were introduced in April 2017. Since then, employers with an annual UK payroll bill in excess of £3 million have been required to pay the equivalent of half a percent of the excess into their own dedicated apprenticeship service account. This additional hypothecated tax is known as the Apprenticeship Levy (the Levy).
The Levy at a glance
- Employers will pay 0.5% of their annual UK payroll bill in excess of £3 million into the Levy
- Levy payments will be made to HMRC via the monthly PAYE process
- Levy funds can only be spent on approved apprenticeship programmes such as UCQ’s Chartered Manager Degree Apprenticeship (CMDA)
- Employers wishing to use their Levy payments to fund apprenticeships will need to set up an apprenticeship service account through Government Gateway
Government will top up employer Levy payments by 10%
- Organisations that have exhausted the funds in their Levy account will receive a minimum of 95% of the cost of any further apprenticeship programmes they wish to undertake from the government
- Organisations not paying into the Levy will receive a minimum of 95% of the cost of, and can simultaneously enrol up to 10 members of staff, onto approved apprenticeship programmes from the Government
- Levy funds can be used to upskill existing staff members in areas including leadership and management, as well as to bring new talent into the organisation