The levy explained
What is the apprenticeship levy and how does it affect your business?
Businesses in the UK with an annual pay bill of more than £3 million will pay the Levy. The Levy rate is 0.5% of an employer's annual pay bill and businesses receive a £15,000 allowance to offset against their payment.
The pay bill is calculated as all payments to employees that are subject to employer Class 1 secondary National Insurance contributions (NICs), such as wages, bonuses and commissions. Earnings below the Class 1 secondary threshold are not counted when calculating.
The Levy is collected at the same time as PAYE payments are made and can be used to purchase Apprenticeship education via the Government Gateway’s Digital Apprenticeship Service (DAS). Services offered by approved providers can be found here.
Levy funds that are unused after two years are due to be recycled to other employers. (See our section on Funding)
The finer details on the Levy may change from time to time. Up to date information is on the Government’s website.
The Levy pays for a variety of Standards. You can find Standards that have been approved and are ready for delivery, as well as those that are in development on the Government’s website.
Each Standard is created by a group of employers, who prescribe the Knowledge, Skills, and Behaviours required to meet the Standard. The Standard represents an occupational profile across different sectors of the economy.
Each Standard has a funding band that sets the top price that Government will contribute to the delivery of the training. Providers and businesses can agree higher or lower rates during a period of negotiation. Costs that surpass the upper limit, are funded directly by the business.
There is also an Assessment Plan for each Standard which sets out the testing mechanism the learner will have to achieve to pass the End Point Assessment. Each Assessment can use a variety of methods to achieve competency.
The finer details on the Levy and eligibility can be found on the Government’s website.
- People aged 16 and above, with no upper age limit
- People who are employed or recruited to a vacancy
- People residing in England who are PAYE contributors
- People with prior qualifications are eligible for funding, however, the qualification has to be different to the primary qualification
- A number of incentives are provided for new Apprentices or those that require additional support to complete their qualification
Businesses access Levy funding via the Digital Apprenticeship Service. They will contribute to their Account on a monthly or quarterly basis, in line with their Levy contributions.
The Government provides a £15,000 allowance for each business as well as co-financing up to 90% of any additional funds required by the business to undertake additional training.
The funding can only be used towards the costs of Apprenticeship education and end-point assessments and must be spent with an approved training provider and assessment organisation. You can find more information in the Government’s Apprenticeship Funding Guide.
Levy funds in Scotland, Wales and Northern Ireland are handled differently. The following links provide further details: