What is the
apprenticeship levy
The apprenticeship levy can be incredibly beneficial to businesses, boosting essential training and developing apprenticeship programmes as well as increasing employee engagement.
The government apprenticeship levy is a form of taxation designed to help companies offer more apprenticeships. It was introduced to benefit businesses by boosting essential training and developing apprenticeship programmes.
The government apprenticeship levy is a tax paid by employers. It is then stored in a fund which can be accessed to help pay for apprenticeship training costs.
It applies to those with a payroll of more than £3 million (the apprenticeship threshold)
It is used to fund apprenticeship training
The levy is charged at 0.5% of an employer’s total payroll (apprenticeship levy allowance)
It is collected monthly through PAYE.
Phoenix 4 Training is an award-winning apprenticeship training provider with the expertise to help you make the most out of using your apprenticeship levy. Whether you’re a levy paying employer or a small business exploring your options, Phoenix will work with you to understand apprenticeship funding and maximise your return on investment. Find out how we develop ambitious apprenticeship levy strategies for our partners, to maximise funds and minimise expiration.
Apprenticeship levy explained
The apprenticeship levy was introduced as a government scheme to fund apprenticeships. HMRC apprenticeship levy rules state that employers that meet the apprenticeship threshold and have a payroll of more than £3 million must pay a 0.5% levy on their total payroll, offset by a £15,000 government apprenticeship levy allowance.
The levy is paid monthly through PAYE alongside income tax and national insurance contributions. Employers must declare the apprenticeship levy each month from the start of the financial year.
Levy contributions appear in a digital account which can be used by the employer to arrange and pay for apprenticeship training. The funds can only be spent on apprenticeship training or End-point Assessment according to apprenticeship levy rules.
After 24 months any unused levy funds expire and return to the government.
Non-levy paying employers can pay 5% of the apprenticeship course cost, and the government will cover the remaining 95% through the process of ‘co-investment’.
If your payroll is more than £3 million, you’re already invested in the levy.
Using the apprenticeship levy
The levy funds sit in a digital ‘apprenticeship service’ account used by employers to fund apprenticeship training provision. The account is used to manage levy funding, track apprentices, find training providers, or transfer unused funds.
Any levy funds are topped up each month with a 10% government contribution. Any levy funds expire after 24 months, so it is vital to utilise your levy as soon as possible.
Once a programme and training provider has been selected and a price agreed, your provider will be paid out of your digital account every month. Apprenticeship levy rules state that your levy must only be used to pay for apprenticeship training and End-point Assessment, and cannot be used to pay apprentice wages.
Apprenticeship funding for employers
Government incentives
Employers that take on an apprentice aged 16 to 21 will receive a £1,000 government incentive to help with the costs associated with taking on a younger worker.
Employers that take on an apprentice aged between 19 and 24 who have previously been in care can also access a £1,000 government payment.
Small employers below 50 people can train apprentices aged 19 to 24 who have left care at no cost.
Co-investment and apprenticeship levy connected companies
The co-investment option sees employers pay 5% of apprenticeship course costs, with the government contributing the remaining 95%. This means that non-levy paying companies have the option to access an apprenticeship programme by paying 5% of the cost.
If a levy paying company runs out of funding in their account, the co-investment option is available for them too. The co-investment rate was reduced from 10% to 5% in April 2019. Non-levy payers are able to reserve a maximum of 10 apprenticeship starts a year.
Government contribution for levy payers
The government tops up all levy payments into your digital account by 10%. As an example, for every £100 an employer pays into their levy fund, there will be £110 in the digital account.