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How Does the Apprenticeship Levy Work

The apprenticeship levy was introduced to provide continued long-term funding for apprenticeships and give employers more negotiating power to deliver training programmes to their workers.

The apprenticeship levy allows more money to be accessible for apprenticeship training. It helps employers choose the apprenticeships they offer, how many they sell, and when they sell them. By 2019-20, the amount of funding allocated for apprenticeship investment in England will have risen to more than £2.5 billion, more than double the amount spent in cash in 2010-11.

Since its introduction, the levy has successfully supported almost 313,000 people in starting their apprenticeship courses. Despite this progress, some citizens are also perplexed about how the levy works. Here are a few essential facts to be conscious of:

Do I have to pay the levy if I own a business?

Employers with a payroll bill of more than £3 million will be required to pay the levy (they pay 0.5 per cent of their total annual pay bill). Currently, 2% of companies pay the apprenticeship levy, but this incentive funded almost half of all apprenticeships in 2017/18.

As a levy-paying firm, how do I access my funds?

Employers who incur the levy could use their funds via the online apprenticeship scheme. The funds in their accounts are valid for apprenticeship study in England.

Will my unused funds be spent just for apprenticeships?

The levy assists all companies in covering the costs of apprenticeship preparation. Any levy funds that are not spent are used to support current apprentices in finishing their schooling and to pay smaller companies with apprenticeship training.

Is the tax just imposed on big corporations?

In no manner, shape, or form. The levy assists all companies in covering the costs of apprenticeship preparation. However, smaller businesses with a combined annual salary bill of less than £3 million contribute just 5% of the cost of apprenticeship training, with the rest paid by the government.

How does the government help levy-paying businesses allocate their funds?

The National Apprenticeship Service assists levy-paying businesses using their levy funds to benefit their businesses through face-to-face and telephone assistance.

Employers who incur the tax would now be able to transfer up to 25% of their levy funds to other employers, which will help ensure that the system is flexible and meets the needs of employees while still aiding smaller businesses in participating in additional training programmes.

I am a business owner who is having trouble using my levy funds.

We understand that employers want and need flexibility. To that end, the government extended the time limit for employers to use their levy funds from 18 to 24 months. In addition, employers who incur the tax could now transfer up to 25% of their levy funds to other employers.

Is the apprenticeship levy contributed to an increase in the number of apprenticeships taken up?

After its introduction on April 6, 2017, the levy has specifically aided 312,900 individuals in starting their apprenticeship course, according to the most current figures.

What happens to unutilised funds?

Employers have 24 months from the day they receive their apprenticeship programme account to utilise their assets; otherwise, their funds would expire. The funds would lapse to enable levy payers to participate in high-quality planning and assessment while stopping levy payers from amassing large balances. Any levy funds that remain unspent at the close of each fiscal year, on the other hand, are used to assist existing apprentices in finishing their education, to offer apprenticeship instruction for smaller companies, and provide additional payments to apprentices.

Since I am a levy-paying corporation, would the government use my unspent levy funds on other items?

Employers in England can only use their levy funds for apprenticeship training.

However, it is essential to note the difference between employer levy funds and the department’s ring-fenced apprenticeship budget. Both apprentices who are now enrolled in school and those that are only starting are covered by the department’s budget, as are others who work with companies who pay the apprenticeship levy and those who do not.

We expect that as businesses of all sizes employ and train more apprentices, the apprenticeship cost would be significantly underspent (if at all). As a result, we expect that levy payers would invest a more significant portion of their donations.

My employee needs a longer-term apprenticeship programme, but my levy funds are set to expire in 24 months. What am I supposed to do to compensate for this?

The notion that an employer’s savings in their apprenticeship service account expire after 24 months would not exclude employers from paying the total cost of an apprenticeship that lasts longer than 24 months. This is because new funds are paid into an employer’s account regularly and pay the bill.

Apprenticeship payments are spread out throughout the apprenticeship and billed in monthly instalments. The government also utilises the oldest funds in an account first to limit the risk of funds expiring.

Only uninvested assets would be lost 24 months after they are transferred into an employer’s account. If an employer’s budget does not have adequate money to cover the monthly payment, the government will pay 90% of the sum due.

Employers will use the National Apprenticeship Service’s ‘Estimate my apprenticeship support’ tool to determine how much money their business will need to spend on apprenticeships.

Does the Apprenticeship Levy Work? Yes or No?

Yes, Thousands of firms, like top corporations including Channel 4, Royal Mail, and Lloyds Banking Group, as well as public service organisations including the NHS and the British Armed Forces, are currently leveraging levy funds to offer a wide range of high-quality apprenticeship programmes.

Updated on September 7, 2022

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