What is the Apprenticeship Levy?

Apprenticeships in recent years have been massively transformed from how they used to operate, now more so than ever thanks to the government’s commitment to improving apprenticeships and increasing their number. Like many businesses in the last year you have likely been wondering what the Apprenticeship Levy is, who it applies to and what you can do with it. If you feel you need to have the apprenticeship levy explained then read on, we have you covered.

As part of the UK government’s commitment to providing more apprenticeships, and to improve the overall quality of apprenticeships that are available, from April 2017 onward a special tax is now levied from large businesses. This tax will be used to fund 3 million new apprenticeships by 2020.

Only businesses with a wage bill over £3 million. and above will be liable to pay the apprenticeship levy, meaning that only 2% of employers will be impacted. This applies to all organisations however,  including public and private sectors as well as charities and educational providers like universities.

The Levy itself is easy to calculate. It is equal to 0.5% of an organisation’s wage bill, with every organisation getting an allowance of £15,000 to offset against the amount they owe. This means that companies with a payroll below £3m will pay nothing.

 

To give an example:

 

For a company with a payroll of £3 million:

 

£3 million payroll x 0.005 (0.5% levy) = £15,000 pre allowance levy.

£15,000 pre allowance levy – £15,000 levy allowance = £0 levy payable

 

For a company with a payroll of £10 million:

 

£10 million payroll x 0.005 (0.5% levy)  = £50,000 pre allowance levy.

£50,000 pre allowance levy – £15,000 levy allowance = £35,000 levy payable

The HMRC will collect the apprenticeship levy through your PAYE system alongside tax and National Insurance contributions. If your organisation is required to pay the levy you will be provided a Digital Apprenticeship Service account which you can use to pay for apprentice training.

You can use the funds you have paid into the apprenticeship levy to pay for apprentice training for both new and existing staff so long as the training meets an approved standard and the apprentice meets the eligibility criteria. You can only put your funds towards training costs and cannot use it to pay for wages, travel or the set-up of an apprenticeship programme.

One of the most effective uses for your levy funds might be utilising it to pay for a management apprenticeship. Create the Space can create bespoke management apprenticeship programmes for your organisation, tailored specifically to your industries needs allowing you to transform your company though your leadership.

 

We are an approved apprenticeship supplier perfectly suited to provide you with Management Apprenticeships that can improve your business on all levels by changing behaviour, shifting leadership thinking and transforming culture. If you are interested in Apprenticeship Levy Guidance,  Create the Space can help you maximise the benefits of your levy funding so contact us today.