(AND NEW FUNDING ARRANGEMENTS FOR ALL APPRENTICESHIPS)
The Apprenticeship Levy was introduced from 6 April 2017. We have developed a guide for employers but know that some details remain a little sketchy and employers may have a number of questions. We have gathered together, and hopefully answered, some of the most frequently asked questions and will keep this as up to date as possible. Please also contact us if you have any other questions or would like to discuss how you can benefit from Apprenticeships in your own organisation.
What is the Apprenticeship Levy?
The Apprenticeship Levy is an amount of money that employers will pay towards the funding of Apprenticeships in England. In effect it is a new tax which the government has introduced.
Why was it introduced?
It was introduced to help the government meet their target of 3 million Apprentices by 2020. It’s also intended to encourage increased commitment to Apprenticeships by employers, since they can use it – to fund their own Apprenticeship training – or lose it.
When was it introduced?
The Levy was introduced on 6 April 2017. All Apprentices who started before 1 May 2017 will continue on the previous funding arrangements. A new system for funding all new Apprenticeships (including through the Levy) began in May 2017.
Who has to pay it?
It applies to all industries in the UK, including public and voluntary sector organisations such as charities. However, there is a £15,000 ‘allowance’ – or threshold for payment – which means that only organisations with a wage bill of over £3 million will actually pay any Levy. This means that only around 2% of businesses in the UK will pay the Levy.
I don’t have Apprentices, do I still have to pay?
As above, it applies to all organisations irrespective of whether they have Apprentices. Employers can’t opt out of paying the Levy.
How much do organisations have to pay?
The Levy has been set at a rate of 0.5% of the annual wage bill, based on total employee earnings subject to Class 1 secondary National Insurance Contributions (NICs). The following are examples of how the calculations will work:
Employer 1: Annual Wage Bill = £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000
Since this is less than the £15,000 ‘allowance’ this employer won’t pay any Levy
Employer 2: Annual Wage Bill = £4,000,000
Levy sum: 0.5% x £4,000,000 = £20,000
£20,000 minus £15,000 allowance = £5,000 Levy to pay for this employer
Employer 3: Annual Wage Bill = £10,000,000
Levy sum: 0.5% x £10,000,000 = £50,000
£50,000 minus £15,000 allowance = £35,000 Levy to pay for this employer
How much will the Levy raise?
The government expect to raise £3 billion per year though the Levy with £2.5 billion being made available for Apprenticeships in England. It is expected that the remaining £0.5 billion will be raised / and passed to the devolved governments / assemblies in Scotland, Wales and Northern Ireland.
How is the Levy collected?
The Levy is paid monthly to HM Revenue and Customs (HMRC), through the Pay as You Earn (PAYE) process alongside tax and NICs.
How can I access the money I’ve paid into the Levy?
The money you pay will be held in a new Digital Apprenticeship Service (DAS) account. You will be able to use this to pay for training and assessment of Apprentices. If you haven’t done so already, you will need to register to create your account. Training Providers, like Access Training, can advise you on this.
What’s this about government ‘top-ups’?
The government will top-up your funds by 10%. That means that for every £1 that enters your digital account, you’ll get £1.10 to spend on Apprenticeship training.
What can I spend my Levy money on?
It can only be used towards the costs of Apprenticeship training and assessment. This must be with an approved training provider and assessment organisation. It can’t be used on other costs associated with your Apprentices (such as wages or travel costs) or for other types of training.
What sorts of Apprenticeship are there?
Apprenticeships come in different levels from level 2 up to degree level Apprenticeships and are based on job roles. There are 2 different types of Apprenticeship. Apprenticeship frameworks involve a series of work related vocational and professional qualifications. These are gradually being phased out and replaced by new Apprenticeship Standards which cover specific job roles. These set out the core skills, knowledge and behaviours required by the Apprentice to be fully competent. For ‘standards’, Apprentices will need to undertake an end point assessment to complete / achieve their Apprenticeship (rather than achieving specific stand-alone qualifications).
What age do Apprentices have to be?
Any age. You can offer Apprenticeships to new or current staff of all ages and at any level. The government wants to encourage employers to offer young people excellent career opportunities through Apprenticeships. They will therefore pay you £1,000 for each 16-18 year old you enroll on an Apprenticeship (paid in 2 stages, at 3 and 12 months). This is paid whether you are a Levy or Non-Levy payer and is irrespective of the size of company. Older staff (new or current), even those with degrees, can now also follow Apprenticeships if they are taking up new roles or require new knowledge and skills to perform their roles.
Who will provide the training and assessment?
You will need to select a training provider. If you are spending funds from your digital account, or accessing funding through co-investment, you can only spend it with an approved provider. You can get help to choose an Apprenticeship and training provider on-line through
For Apprenticeship standards, you will also need to choose an end point assessment organisation. Training providers (such as Access Training) will be able to advise you on this.
How long do Apprenticeships last?
This depends on the Apprenticeship. All Apprenticeships should have a minimum duration of 12 months, but some may take considerably longer. For instance, we would expect a Customer Service level 2 Apprenticeship to take 12 months but a Management Higher Apprenticeship (level 5) to take 24 months. You may also want to develop your Apprentice through different levels. Accounting (AAT) Apprentices for instance, often move from level 2, to 3 and then level 4 (then often progress to CIMA/ACCA), so they could be supported through Apprenticeships for more than 4 years.
How much do Apprenticeships cost?
You will need to agree this with the training provider you choose to deliver your Apprenticeship/s. Funding support for Apprenticeships are based on maximum bands set for each Apprenticeship framework or standard (ranging from £1,500 to £27,000). Costs are usually spread out over the length of the Apprenticeship. For those employers who will be paying the Levy, a discussion up front with your training provider may be useful to ensure you maximise your funding. To give you an indication of possible costs, the following are examples of Apprenticeships and funding band maximums:
- Customer Service level 2: £4,000
- Accounting level 3: £9,000
- Management level 5: £9,000
- Engineering Machinist level 3: £21,000
What happens if I don’t spend all my Levy money?
Funds paid in to your digital account will expire after 24 months unless you spend them on Apprenticeship training. You will be able to access your digital account to see Levy payments going in and payments for Apprenticeship training going out.
Can I use it to fund Apprenticeships for other employers?
The government are aware that some employers would like to use some of their money to fund Apprenticeships for other employers if they won’t use it all themselves, for example employers in their supply chain or an Apprenticeship Training Agency (ATA). They are planning to allow employers to transfer 10% of their funds to another employer’s digital account from 2018.
What happens if I want to spend more than I have in my account?
If you want to spend more than your Levy on Apprenticeship training, the government will provide support to help meet the additional costs, called ‘co-investment’, similar to the arrangements for employers who don’t pay the Levy – see below.
I’m not paying the Levy, so how do I access funding for Apprenticeships?
The government ‘co-invest’ in Apprenticeship training with employers that don’t pay the Levy, ie you will be asked to make a small contribution to the cost of the training and they will pay the rest, up to a maximum amount of funding available for that Apprenticeship. The government will contribute 90%, with employers paying the remaining 10% direct to their chosen training provider. You can get help to choose an Apprenticeship and training provider on-line through
Any extra help for small employers?
The government support employers with less than 50 employees by paying 100% of Apprenticeship training costs for 16-18 year old olds and 19-24 year olds who have been in care or have a Local Authority Education, Health and Care Plan.
Will there be funding for employing Apprentices who need extra support?
The government will pay you £1,000 for each 16-18 year old you enroll on an Apprenticeship (paid in 2 stages, at 3 and 12 months). This is to recognise the additional costs / support that may be required when recruiting a young person. This is payable to Levy and Non-Levy payers and is irrespective of the size of company. They will also pay the full costs for any level 1 and 2 English or Maths training required by your Apprentices (any age).
What will happen to existing industry Levies?
Some industries – such as Construction and Engineering – already operate Levy schemes. Employers paying those will still have to pay the Apprenticeship Levy. Industry Training Boards are consulting with their members and considering potential changes that might be needed to their current Levy arrangements.
Where can I get further information or advice?
We would be happy to answer any queries you have (if we possibly can), so contact us on 0191 – 490 4646 or email email@example.com.
The government have also set up an employer helpline which you might find useful:
Phone: 08000 150 600