An apprenticeship levy is a government-imposed tax on employers in the United Kingdom that funds apprenticeship programs. It was introduced in 2017 and is paid by employers with an annual pay bill of more than £3 million. The levy is charged at a rate of 0.5% of an employer’s pay bill and is paid into a central pot which is then used to fund apprenticeship programs.
It has been controversial since its introduction, with many employers feeling that they are being unfairly taxed to fund a program they may not use. However, the levy has successfully funded apprenticeship programs and helped increase the number of apprenticeships in the UK.
When is the levy payable?
The levy is payable monthly (0.5 % tax) and is paid into a central pot. Employers can then use this money to pay for apprenticeship training.
Who can use the levy
It can only be used by employers with a pay bill exceeding £3 million a year. The levy is charged at a rate of 0.5% of an employer’s pay bill and is paid to HMRC through PAYE. The levy can fund apprenticeship training for new and existing employees and is available to employers in England. The money paid into the levy can only be used to fund apprenticeship training and assessments.
How does the Levy work?
The Levy gets paid through PAYE alongside a business’s usual tax and National Insurance payments. The HMRC receive this payment and sets it aside for apprenticeship training.
How do I pay the Levy?
The Levy is paid monthly, similar to Income Tax and National Insurance contributions (NICs). There’s more information here. If a business overpays the Levy during the course of the year, they’ll get PAYE credit by way of a refund. According to HMRC, “Apprenticeship Levy payments are a deductible expense for Corporation Tax.”
Conclusion
The apprenticeship levy is an excellent, cost-efficient way for employers to pay for apprenticeship training.
FAQs
If you do not pay the levy, you won’t be able to use the apprenticeship service to pay for apprenticeship training and assessment until at least mid-2019 unless you are receiving a transfer of funds from a levy-paying employer. See more guidance for non-levy paying employers.
The levy is charged at 0.5% of your annual pay bill
Employers
Not only do you benefit from this as an employer, but the employee should also see the benefit from a job flexibility and satisfaction point of view. Because the apprenticeship levy is primarily focused on the employer, it’s easy to ignore the apprentice’s side of things.
Payments of the levy are deductible for tax purposes. The apprenticeship levy is payable by employers. In this context, this essentially means anyone who pays the employer’s national insurance contributions (NICs).
Employers have 24 months to use their funds once they enter their apprenticeship service account. After this point, their funds will expire. The funds expire to encourage levy-paying employers to invest in high-quality training and assessment. It also prevents levy payers from accruing very large balances. However, any unspent levy funds within each financial year are then used to support existing apprentices to complete their training or pay for apprenticeship training for smaller employers.
No, it isn’t a mandatory payment.
The Levy paid by each employer is held in a ‘digital fund’ which the employer can use to pay for apprenticeship training. A 10% government contribution is added to each monthly payment. Funds in the digital fund remain available for 24 months from the date of payment.
