What is the Apprenticeship Levy (AL)?

The Apprenticeship Levy was introduced by the government as a way to increase the quantity and quality of apprenticeships. This is a compulsory tax on employers, which can be used to fund apprenticeship training.

Employers fall into two group: levy payers and non-levy payers.

It is payable by all employers with an annual pay bill of more than £3million at the rate of 0.5%.

Employers with an annual pay bill of £3million or more will have to pay the tax, whether they employ an apprentice or not.

Employers receive a government incentive of £1000 for recruiting an apprentice aged 16-18.

Any member of staff under the age of 25 who is enrolled on an apprenticeship programme will not be subject to national insurance contributions.

How will the Apprenticeship Levy be collected?

This is paid through the Pay as You Earn (PAYE) system, alongside Income Tax and National Insurance Contribution.

What happens to the money once it has been paid?

The money is collected through HMRC, which is then allotted into the Digital Apprenticeship Service (DAS) account which employers can access especially for Apprenticeship training.

Who can access the funds?

If you are a levy-paying employer:

  • You can receive funds for you to spend on apprenticeships
  • Manage your apprenticeships
  • Pay your training provider

You can only use funds in your account to pay for apprenticeship training and assessment for apprentices that work 50% of the time. You cannot use your account to pay for other costs associated with your apprentice (wage, travel and subsidiary costs etc.).

If the cost exceeds the funding, employers will need to pay the difference with funds from their own budget.

Non-levy employers will share the cost of training and assessing their apprentice with government- a ‘co-investment’. The employer will pay 10% towards the cost and the government will pay the rest.

How long do employers have to spend their Levy?

The levy fund will stay in your account for 24 months. If you do not use them in that time, you will lose them. You will also lose the government top up and other companies will be able to access you under-spent funds. Whenever a payment is taken from your account, it automatically uses the funds that entered your account first.