The 'Apprenticeship Levy' is a form of tax introduced in 2017.  It applies to any organisation whose annual payroll bill exceeds three million pounds.  This translates to those with c.100 employees or more.

Any organisation passing this threshold is required to register on the Apprenticeship Service website where they will be allocated an Apprenticeship Levy 'account'.

The amount employers pay into the levy account is 0.5% of their payroll bill.  If the payroll bill is exactly £3m, this means the levy will be £15,000.  

All employers registering as levy-payers receive a one-off £15,000 rebate.  This means that in the first year of registration, if the payroll bill is exactly £3m, the actual cost is £0.

For every £1 an organisation pays into their levy account, the government adds 10p, i.e. a 10% uplift.  The table opposite illustrates this.

The levy is calculated monthly using HMRC payroll records so employer contributions go up and down in line with changes to their payroll costs.

Funds in the apprenticeship levy account can be used by the employer to fund apprenticeship training.  Training must be delivered by an approved training provider, i.e. included on the national Register of Approved Training Providers  (RoATP).  They cannot be used to fund any other kind of training.

Apprenticeship Training programmes are available for all ages (there is no upper age limit) and at all levels right up to Professional/Chartered status and Master's Degree level.

Funds held in the apprenticeship levy account 'expire' after 2 years so if the fund is not used to pay for apprenticeship training it is lost as a form of 'tax'.

When the employer enrols an apprentice, 80% of the funding for that apprentice is taken from the levy account on a monthly basis over the 'planned' duration of the programme.  This duration is agreed at the start between the employer, the training provider and the apprentice.  The final 20% is taken from the levy account following completion of the programme.

Funds taken from the levy account are paid directly to the training provider by the Education and Skills Funding Agency (ESFA) which manages the Apprenticeship Service.

If the funds in the levy accound are insufficient to cover the cost of the apprenticeship training in any month throughout the programme, the funding of the training reverts to the same 'coinvestment' model used with employers who do not pay the levy.  Under this model, the government pays 95% of the cost of training delivery and the employer is required to contribute 5%.  This is an example of why an employer who pays the levy may have to make a small additional contribution.

We regularly provide information and advice to organisations who pay the apprenticeship levy.  This includes information and advice about all options, not just those we can help with.