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Is your business Levy ready?

The way Apprenticeships are funded is changing

UK businesses have until April 2017 to prepare for the introduction of the Apprenticeship Levy. 

The Apprenticeship levy is 0.5% of a company payroll, paid by all employers with a payroll in excess of £3 million per annum.

Red line

This new scheme will:

  • Put the control of Apprenticeship funding in the hands of employersRed line
  • Enable employers to decide where, and how, the Apprenticeship money is spentRed line
  • Give employers, who commit to Apprenticeships, the opportunity to get more out of the levy fund than they put inRed line
  • Encourage the recruitment of more Apprentices and the investment in Apprenticeship programmes to upskill existing workforcesRed line
  • Through the additional employer incentive, encourage the employment of 16-18 year oldsRed line
  • Fund the ambition for raising both the quality and quantity of Apprenticeships in England and assist the government in achieving its ambition to deliver 3m Apprenticeships by 2020.Red line
  • Further change the perception of Apprenticeships to be regarded as a viable alternative to university

 

You can contact us to discuss the levy and how the changes will affect your business.

Key Facts

  • Levy Paying Employers

    1. - From 6th April, 2017, all employers operating in the UK, with an annual payroll of over £3 million will be required to pay a levy of 0.5%, regardless of whether they make use of the funding available for Apprenticeships.


    2. - The 0.5% levy is on your full UK payroll bill, not just the amount over £3 million. 


    3. - Your ‘Pay bill’ will be based on total employee earnings subject to Class 1 secondary National Insurance Contributions (NICs).


    4. - The levy will be payable through Pay As You Earn (PAYE) and will be payable alongside National Insurance and income tax


    5. - Payment will be taken monthly, in real time, meaning as your pay bill changes each month, the levy amount taken will be reflected.


    6. - The number of employees based in England will be calculated on a specific date using address data already held by HMRC.


    7. - Although the levy is calculated based on your full UK pay bill, employers will only be able to spend their English portion on English Apprenticeship training.


    8. - You will receive a levy allowance of £15,000 per tax year to offset against a levy payment made.


    9. - If you take on Apprentices, you will receive further offsets in the form of top-ups from the Government. On a monthly basis, for every £1 paid into training an Apprentice, the Government will apply a further 10% top-up taking it to £1.10 in value. This means, employers in England who pay the levy and are committed to Apprenticeship training will be able to get more out than they pay in.


    10. - An employer incentive of £1,000 per Apprentice will be made to all employers who employ an Apprentice aged 16-18 years old, or those aged 19-24 and who is a care leaver or has a Local Authority Education, Health & Care (EHC) plan.



    Please note: Levy payments are calculated on gross annual payroll for all employees in UK. However, the ‘top up’ is calculated on the number of employees resident in England only.


    11. - For Apprentices under 25 years of age, the secondary Class 1 (employer) NIC will be removed on earnings up to the Upper Earnings Limit (currently £43k).


    12. - Your levy payment will then be ring-fenced in the form of electronic vouchers. Employers use this voucher to purchase Apprenticeship training and assessment from approved providers and organisations, from May 2017 onwards.


    13.- Levy funds (vouchers) will be accessed and managed via a new online portal called the Apprenticeship Service Account* (ASA). 


    14 - All un-used vouchers will expire after 24 months.


    15 - The levy can be claimed back and spent on Apprenticeship training for all employees at all levels and ages, as long as they meet the current SFA funding criteria. 


    16 - It is estimated 3-5% of an employer’s workforce will need to be an Apprentice to fully utilise the levy.


    17 - All new and existing Apprenticeships will be placed into one of the 15 bands. The limit of these bands range from £1,500 to £27,000 and employers are expected to negotiate a price for Apprenticeship training.


    18 - Funding bands will cap how much the Government will ‘co-invest’ if an empoyer has insufficient funds from their levy payments to cover the number of Apprenticeships they want to use.


    19 - Where employers require more funds for their Apprenticeship programmes than their digital account enables, the Government will support and help employers meet 90% of these additional costs. Employers will be asked to make an additional 10% contribution paid directly to the chosen provider.


    20 - Apprenticeships are a devolved policy. This means that authorities in each of the UK nations manage their own Apprenticeship programmes, including how funding is spent on Apprenticeship training. The ASA will support the English Apprenticeship system. To calculate how much you will have to spend through the English system, the Government plans to use data they already hold about the home address of your employees. This data will be used to calculate what proportion of your pay bill is paid to employees living in England. This assessment will be made in early 2017.


    21 - A new body, The Institute for Apprenticeships, will oversee the levy and the new Apprenticeship Standards. It will provide guidance on the use of the levy funding and lead the development of the Standards. The Institute is due to be operational from April 2017.   The levy will not affect the way employers fund training for Apprentices who started their training before 1 May 2017. The funding for these Apprentices will continue under the terms and conditions that were in place at the time the Apprenticeship started.


      


    22 - Based on current Skills Funding Agency (SFA) funding rules, the levy can be claimed back and spent on Apprenticeship training for all employees at all levels and ages.


    23 - The levy can also be used to fund existing employee development as long as they meet the current SFA funding criteria.


    24 - It is estimated 3-5% of an employer’s workforce will need to be an Apprentice to fully utilise the levy.


    25 - Where employers require more funds for their Apprenticeship programmes than their digital account enables, the government will support and help employers meet 90% of these additional costs. Employers will be asked to make an additional 10% contribution paid directly to the government or chosen provider.


    26 - Apprenticeships are a devolved policy. This means that authorities in each of the UK nations manage their own Apprenticeship programmes, including how funding is spent on Apprenticeship training. The DAS will support the English Apprenticeship system. To calculate how much you will have to spend through the English system, the government plans to use data they already hold about the home address of your employees. This data will be used to calculate what proportion of your pay bill is paid to employees living in England. This assessment will be made in early 2017.


    27 - A new body, The Institute for Apprenticeships, will oversee the levy and the new Apprenticeship Standards. It will provide guidance on the use of the levy funding and lead the development of the Standards. The Institute is due to be operational from April 2017.


    28 - The levy will not affect the way employers fund training for Apprentices who started their training before 1 May 2017. The funding for these Apprentices will continue under the terms and conditions that were in place at the time the Apprenticeship started.


     

  • Non Levy Paying Employers

    Non-Levy Paying Employers – Key Facts


    1 - Businesses with an annual payroll cost of less than £3 million each year will not be required to pay the levy. Apprenticeships will be either fully-funded or co-funded by the Government.


    2 - Employers with an annual payroll of less than £3 million will be required to pay 10% of the cost of each Apprenticeship. The remaining 90% will be paid for by the Government.


    3 - Employers with 1-49 employees and who employs an Apprentice aged 16-18, or those aged 19-24 year old and who is a care leaver or who has a Local Authority Education, Health and Care (EHC) plan, will pay 0% towards the cost of the Apprenticeship.


    4 - An employer incentive of £1,000 per Apprentice will be made to all employers who employ an Apprentice aged 16-18 years old, or those aged 19-24 and who is a care leaver or has a Local Authority Education, Health and Care (EHC) plan.


    5 - For Apprentices under 25 years of age, the secondary Class 1 (employer) NIC will be removed on earnings up to the Upper Earnings Limit (currently £43k).


    6 - All new and existing Apprenticeships will be placed into one of the 15 funding bands. The limit of these bands range from £1,500 to £27,000 and employers are expected to negotiate a price for Apprenticeship training.


    7 - Funding bands will cap how much the Government will ‘co-invest’ if an employer does not pay the levy.


    8 - Skills Funding Agency (SFA) funding rules apply to all Apprenticeships.


    9 - The levy will not affect the way employers fund training for Apprentices who started their training before 1 May 2017. The funding for these Apprentices will continue under the terms and conditions that were in place at the time the Apprenticeship started.


     

Your Questions Answered

  • Who has to pay the Levy?

    Employers in England with a payroll exceeding £3m per annum.


    Separate arrangements apply to employers in Scotland, Wales and Northern Ireland.

  • Payroll greater than £3m per annum?

    If your payroll exceeds £3m, then an Apprenticeship levy of 0.5% will be applicable to your business, by way of contribution to the cost of funding Apprenticeships.


    This contribution is to be paid monthly, direct to HMRC and has a £15,000 allowance to be offset.


    The government intends to top-up this contribution by 10%, enabling most employers a greater investment in Apprenticeships than they have contributed.


    You can invest in new or existing employees. Employees of any age can be eligible for an Apprenticeship, so long as there is a significant requirement for training.


    Should you wish to spend more on Apprenticeships than available in your fund, there will be a requirement to contribute to this cost.

  • Payroll less than £3m per annum?

    If your payroll is less than £3m per annum, then there is no requirement for you to pay the Apprenticeship levy.


    If you have less than 50 employees, you will not have to make any contribution to the cost of any Apprentices you employ under the age of 18.


    There will be a requirement to pay a 10% contribution towards the training of Apprentices over the age of 19. The government will contribute the additional 90%.


    If you have more than 50 employees, then this 10% contribution will be applicable to Apprentices of all ages, and the government will fund the remaining 90% of the cost.

  • How much is the Levy?

    The Apprenticeship levy is 0.5% of your company payroll. There will be a £15,000 allowance, applicable to all employers, meaning that only businesses with payrolls in excess of £3m are subject to making payment. £15,000 being offset as 0.5% of £3m.


    For example, a company with an annual payroll of £4.5m would pay a £7,500 annual levy.


    £4.5m - £3m = £1.5m


    x 0.5% = £7,500


    The Skills Funding Agency have produced a useful tool click here to help employers understand what levy they will pay and how they could use the new digital service to plan and fund training.


    You can also call us to discuss your specific circumstances or use our calculator for a quick guide as to what you can expect to pay.

  • How do we pay?

    Payment is made to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.

  • How can we use our contribution to invest in Apprenticeships?

    If the Apprenticeship levy is applicable to your business, you will be able to access funding for Apprenticeships through your Digital Apprenticeship Service account.


    You will be able to use this to pay for training and assessment for Apprentices in England. The service will also help you find approved training providers such as Paragon Skills, who can help you develop and deliver your Apprenticeship programme.


    We can help you get the most out of Apprenticeships and effectively plan your investment in this area.

  • What is the Apprenticeship Service Account?

    The Apprenticeship Service Account has been set up to make life easier for employers.


    Once you have paid the levy to HM Revenue and Customs (HMRC) you will be able to access funding for Apprenticeships through your new Apprenticeship Service Account.


    Online tools will be available over the next year and you will be able to register to create your account from January 2017. This way you’ll be able to familiarise yourself with the service before April 2017.

  • What are the benefits to employers?

    The best way to benefit from the levy is to invest in Apprenticeships.


    Significantly the introduction of the levy changes the funding structure of Apprenticeships and puts employers in control. This is shining a spotlight on our industry, the quality of Apprenticeships and what employers and employees stand to gain from them.


    Whether or not your business is required to commit to the levy, its introduction presents an ideal opportunity to reassess your current involvement with Apprenticeships and what they can deliver to your business. If you don’t already employ Apprentices, we think you’ll be surprised by the benefits they can bring to your business. 


    As a top 10 Apprenticeship training provider at Paragon Skills we can assist and advise you on how to effectively plan for the levy and achieve the greatest benefit to your business.


    You can call us today for experienced industry advice and information on all the ways you stand to benefit from investing in Apprenticeships.

  • What is the role of Apprenticeship Training Providers?

    Apprenticeship training providers like Paragon Skills can help you develop and deliver your Apprenticeship programme.


    We offer guidance and advice on the best way to invest in Apprenticeships and effectively plan how to utilise your levy contribution.


    We can also help with recruiting, vetting and accessing potential Apprentices, whether they are new to your business or current employees.


    Our passion lies in inspiring people to succeed. Therefore, we carefully track your Apprentice’s progress and achievements, involving your team at every step, through to the successful completion of their qualification and their continued progression in your industry.


    At Paragon Skills we are proud to be among the top 10 Apprenticeship training providers in England.

  • What is the Government's Vision?

    “Nobody understands the skills employers need better than the employers themselves. That is why we are placing them in the driving seat” - English Apprenticeships : Our 2020 Vision


    Find out more here


    If you have any questions concerning the Apprenticeship levy, you can call Paragon Skills today on 0800 783 2545 to find out more and to discuss your business' unique requirements.

Calculate Levy

Annual Company Salary Cost (above £3m):

£

  • Allowance

    (per year)

    £ 0.00

  • Annual Levy

    (payroll x 0.005 allowance)

    £ 0.00

  • Month Accumulation

    before 10% top up

    £ 0.00

  • Digital Account Monthly Accumulation

    after top up

    £

  • Annual Total

    £ 0.00

  • Annual Apprentices

    0

  • Find out more

Apprenticeships are a valuable part of the UK economy and, with the introduction of the Apprenticeship levy, will give the business community a chance to further develop this route in the workplace. Not only will it continue to support young people entering employment via Apprenticeships, but it will also benefit workforce learning and development as a whole.