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The Apprenticeship LevyEuropean Union Social Fund

The situation relating to public funding of apprenticeships has been changing rapidly. This page is relevant if you are an organisation with an annual payroll over £3 million and are eligible to pay the apprenticeship levy. If you are not within this bracket, please refer to the individual programme pages for information on the government funding available towards the cost of training apprentices.

The apprenticeship levy

The government’s announcement of the introduction of an apprenticeship levy radically changed the legal sector’s view of apprenticeships.

Since 6 April 2017, employers with pay bills of over £3 million are paying a new type of tax in the form of a levy payment. Unlike most other taxes, the levy is put into an account for the employer to use to fund formal apprenticeship training within the organisation.

Employers need to be aware of the rules regarding the levy: they can use what they pay in for apprenticeship training, but if they don’t use it within a certain period, then it is lost. There are other proposed rules to be aware of too.

How much will my organisation have to pay?

It’s slightly complicated. Only businesses with an annual salary bill in excess of £3 million have to pay. Although the levy is 0.5%, the government offsets that by returning what it calls a levy allowance to the employer of £15,000.

For example, if your pay bill in the UK is £10,000,000, your levy payment is:

  • £10,000,000 x 0.5% = £50,000.
  • Deduct the levy allowance of £15,000
  • Your levy payment is £35,000 per year. That is the sum available to you to pay for the formal training of apprentices.

How will the levy payment be made?

Levy payments are collected in monthly instalments, so your account increases each month until you start to pay for apprenticeship training. If you don’t use the money in your levy account in its entirety one month, you can carry it forward to the next month. To manage your account you have to register with the apprenticeship servicem which functions like a digital bank account.

What can I spend my the funds in my account on?

The government states that you can only spend your levy payment on training and assessment of apprentices in England. The good news is that the government adds a 10% top up to your account. Using the example above if your annual pay bill was £10 million, you would pay a levy of £35,000, to which the government would add £3,500 for training your apprentices.

How long have I got to use the money in my account?

You have 24 months in which to use the levy payment you’ve made and the 10% top up contribution from government. If you don’t use it, the funds will be withdrawn. Because your levy payments are made on a monthly basis, the 24 month period is calculated on a rolling basis.

What happens if I use up all the funds in my account, but still want to train more apprentices?

If you exhaust your account but you want to train more apprentices then the government funds 90% of the cost of apprenticeship
training (up to a maximum amount per programme), and you would fund 10%.

What additional incentives are there? 

For new apprentice starts, the government pays £1,000 for each apprentice under the age of 19 at the time of
employment. This is paid directly and has nothing to do with your apprenticeship account.

What other information is being provided on the levy?

Full information is given on the government website.