Apprenticeships are an excellent way to gain practical skills and knowledge while earning a wage. However, you may wonder, “How much apprenticeship levy will I pay?”
The UK government introduced the Apprenticeship Levy in April 2017 to encourage more employers to invest in apprenticeship programs. It is designed to support the growth of apprenticeships across various industries.
In this article, we will delve into the details of the Apprenticeship Levy and help you determine whether your business is required to pay it.
Who Needs to Pay?
If your business has an annual pay bill of £3 million or more, you must pay the Apprenticeship Levy. However, small businesses with a pay bill below £3 million are exempt from paying the levy. Nonetheless, these businesses can still benefit from government support for apprenticeships through co-investment.
How Much Apprenticeship Levy Will I Pay?
The Apprenticeship Levy is set at 0.5% of your annual pay bill. However, the government provides each employer with an annual allowance of £15,000 to offset their levy liability. This means that only businesses with a pay bill exceeding £3 million will pay the levy, and the amount paid will be 0.5% of the pay bill minus the £15,000 allowance. For instance, if your annual pay bill is £4 million, your levy payment would be (£4,000,000 x 0.5%) – £15,000 = £5,000.
The Apprenticeship Levy is paid to HM Revenue and Customs (HMRC) through the PAYE (Pay As You Earn) process and other payroll taxes and deductions. The levy is payable monthly, and employers are responsible for reporting and paying it to HMRC.
Utilising Your Levy Funds
When you pay the Apprenticeship Levy, the funds are made available for apprenticeship training and assessment costs. The government also provides an additional 10% top-up on your levy payment, meaning that for every £1 paid, you receive £1.10 in apprenticeship funding. However, there is a time limit for using these funds. Levy payments expire after 24 months from the month they entered your digital account. So, using your funds within this timeframe is crucial to avoid losing them.
If you do not use all your Levy funds for apprenticeship training, the surplus can support other employers in funding apprenticeships through transfers. From April 2019, employers can transfer up to 25% of their annual levy funds to other businesses, including those in their supply chain. Transfers can greatly contribute to enhancing apprenticeship opportunities across industries.
Summary
The Apprenticeship Levy is a government initiative aimed at increasing investment in apprenticeships and promoting skill development within the workforce. Employers with a pay bill of £3 million or more must pay the levy, while smaller businesses are exempt but can still benefit from apprenticeship support through co-investment. By understanding the details of the levy, businesses can effectively utilise their funds to develop the skills of their workforce and contribute to the growth and success of apprenticeships.