Many of you will have seen the news that the government is committed to achieving three million apprenticeship starts by summer 2020.
To do so, the government has confirmed the introduction of an Apprenticeship Levy from April 2017.
This is a fundamental change to the way Apprenticeships in England are funded. Employers with a UK payroll of over £3m from both the private and public sectors will be required to pay 0.5% of that into a levy. The levy payment will then be ring-fenced and can be used to purchase apprenticeship training.
The levy is the government’s solution to funding the increase in numbers and putting control of funding in the hands of employers.
New Apprenticeship Levy
From April 2017 the way the government funds apprenticeships in England is changing. Some employers will be required to contribute to a new Apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers.
The Apprenticeship levy was introduced on 6 April 2017. The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in Apprenticeships.
Levy rate and allowance
Employers with an annual pay bill of more than £3 million will need to spend 0.5% of their total pay bill on the apprenticeship levy.
However, the Government has introduced a ‘levy allowance’ of £15,000 per year. This means that the total amount you need to spend is 0.5% of your pay bill, minus £15,000.
The levy allowance will operate on a monthly basis and will accumulate throughout the year. This means you will have an allowance of £1,250 a month. Any unused allowance will be carried from one month to the next. For example, if your levy liability in month 1 is £1,000 you will not pay the levy and your allowance in month 2 will be £1,500.
If you have some unused allowance in a month, but paid the levy previously in the tax year, you can receive a credit which you can use to offset against your other PAYE liabilities. The credit will also reduce the amount of levy paid.
If you have multiple PAYE schemes and do not use the full £15,000 allowance, you will be able to offset the unused amount against another one of your schemes once the tax year has ended.
Examples of what you will pay