The apprenticeship levy is a crucial aspect of the UK government’s strategy to boost skills development and create more opportunities for individuals to enter the workforce through apprenticeships.
As a leading provider of early years education and training, Eden Training Solutions is committed to helping employers understand and navigate the complexities of the apprenticeship levy.
In this comprehensive guide, we’ll explore everything you need to know about the apprenticeship levy, including how it works, who needs to pay the levy, and how you can make the most of your levy funds.
What is the Apprenticeship Levy?
The levy is a tax introduced by the UK government in April 2017 to fund apprenticeship training. It applies to employers with an annual pay bill of more than £3 million. it is charged at 0.5% of an employer’s total annual pay bill and is designed to encourage businesses to invest in apprenticeship training and development.
Who Needs to Pay the Apprenticeship Levy?
Employers with an annual pay bill exceeding £3 million are required to pay the apprenticeship levy. This includes both private and public sector employers, regardless of whether they already employ apprentices. The levy is paid through the PAYE system alongside income tax and national insurance contributions.
How is the Apprenticeship Levy Calculated?
The levy is calculated as 0.5% of an employer’s total annual pay bill. However, employers receive an apprenticeship levy allowance of £15,000 per year to offset against their levy payment. This means that only employers with an annual pay bill of over £3 million will actually pay the levy.
For example:
- Employer with an annual pay bill of £5 million:
- Levy sum: 0.5% x £5,000,000 = £25,000
- Minus £15,000 allowance
- Annual levy payment: £10,000
How to Pay the Apprenticeship Levy
Levy-paying employers must report and pay their apprenticeship levy to HMRC through the PAYE process. The levy is paid monthly, and employers need to:
- Calculate their annual pay bill and monthly levy amount
- Report the levy amount to HMRC through their Employer Payment Summary (EPS)
- Pay the levy alongside their monthly PAYE and National Insurance contributions
Using Your Apprenticeship Levy Funds
Once you’ve paid your levy, the funds are available to use through your apprenticeship service account. This digital account allows you to:
- View your levy balance
- Set up and manage apprenticeship programs
- Pay for apprenticeship training and assessment
It’s important to note that levy funds can only be used to pay for apprenticeship training and assessment, not for other costs such as apprentice wages or travel expenses.
At Eden Training Solutions, we offer a range of early years apprenticeships that can be funded through your levy, including:
- Early Years Practitioner Level 2
- Early Years Educator Level 3
- Advanced Childcare Practice Management Level 4
- Early Years Lead Practitioner Level 5
Apprenticeship Funding for Non-Levy Paying Employers
Employers with an annual pay bill of less than £3 million don’t need to pay the apprenticeship levy. Instead, they can access apprenticeship funding through co-investment.
Under this system, the employer pays 5% of the cost of apprenticeship training, and the government pays the rest.
For smaller employers with fewer than 50 employees, the government will fund 100% of the apprenticeship training costs for apprentices aged 16-18 or 19-24 with an Education, Health and Care Plan.
Making the Most of Your Apprenticeship Levy
To maximise the benefits of your levy, consider the following strategies:
- Plan your apprenticeship programs strategically to align with your business needs
- Use your levy funds before they expire (funds expire 24 months after they enter your account)
- Consider transferring unused funds to other employers (up to 25% of your annual funds)
- Partner with a quality training provider like Eden Training Solutions to ensure your apprentices receive high-quality training
The Benefits of Apprenticeships
Investing in apprenticeships through the levy can bring numerous benefits to your organisation:
- Develop a skilled workforce tailored to your business needs
- Improve employee retention and loyalty
- Enhance productivity and innovation
- Contribute to your corporate social responsibility goals
At Eden Training Solutions, we’re committed to helping employers make the most of their apprenticeship levy funds.
Our range of courses and expert guidance can help you create effective apprenticeship programs that benefit both your business and your employees.
FAQ’s
Q: What is the Apprenticeship Levy?
A: The apprenticeship levy is a government initiative introduced to encourage employers to invest in apprenticeship training. It is charged at 0.5% of an employer’s annual pay bill, with specific allowances and rules regarding its use.
Q: Who must pay the Apprenticeship Levy?
A: Employers with an annual pay bill of over £3 million must pay the apprenticeship levy. The levy is charged at 0.5% of the employer’s annual pay bill.
Q: What is the levy allowance?
A: Employers receive a levy allowance of £15,000 annually, which means the first £3 million of their pay bill is not subject to the 0.5% levy.
Q: How can employers use the levy fund?
A: Employers can use the fund to spend on apprenticeship training programmes and assessment for apprentices within their organisation.
Q: What are the funding rules for using the apprenticeship levy?
A: The funds must be used for funding apprenticeship training programmes and assessments with approved apprenticeship providers. They cannot be used to pay apprentice wages or other non-training expenses.
Q: What happens to unused levy funds?
A: Unused levy funds expire after 24 months if not spent on apprenticeship training. These funds are then used to support government apprenticeship training programs for other employers.
Q: How much can an employer spend on an apprenticeship?
A: There is a maximum funding band set by the government, which varies depending on the level and standard of the apprenticeship. Employers need to ensure the apprenticeship cost falls within this funding band maximum.
Q: How is the payment of the apprenticeship levy made?
A: The apprenticeship levy is paid to HM Revenue and Customs (HMRC) monthly through the Pay As You Earn (PAYE) process, and employers can then access and manage their levy funds via the online apprenticeship service account.
Q: Is the apprenticeship levy applicable to all industries?
A: Yes, the apprenticeship levy applies to employers across all industries and sectors in the UK that meet the pay bill threshold criteria.
Q: What changes occurred to the apprenticeship levy in April 2019?
A: In April 2019, several adjustments were made to the levy system, allowing levy-paying employers to transfer up to 25% of their annual funds to other employers, including within their supply chain, helping smaller businesses benefit from the apprenticeship levy.
Conclusion
The apprenticeship levy is a significant investment in the future of the UK workforce. By understanding how it works and how to utilise your levy effectively, you can turn this obligation into a valuable opportunity for your business.
Whether you’re a levy-paying employer or a smaller organisation looking to benefit from apprenticeships, Eden Training Solutions is here to support your journey.
For more information on how we can help you navigate the apprenticeship levy and develop effective training programs, visit our website or contact our recruitment team.
Let’s work together to create meaningful apprenticeship opportunities and build a skilled workforce for the future.
