Learn how to finance an apprenticeship programme with the most up to date information on the levy and how to claim funding back.

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The apprenticeship levy - in a nutshell

The compulsory apprenticeship levy equates to 0.5% of a firm's pay bill - though every employer will receive a £15k allowance against the levy. In practice this means that the levy will only be paid on a pay bill of over £3 million. The money raised will pay for apprenticeships in (England only).

There will be a £15k allowance for all firms meaning that those with paybills under £3m will not have to pay the levy. The money can be spent on apprenticeship training in England only. Money paid by firms in Scotland, Wales and Northern Ireland will return via the block grant as skills is a devolved power.  

What is the Digital Apprenticeships Service?

The Digital Apprenticeship Service (DAS) is the online end-to-end service for employers in England. It will enable employers to find an apprentice candidate, choose a training provider and pay for apprenticeship training and assessment. The system was fully operational for levy payers from April 2017. Those firms not paying the levy will not use the system until at least 2018.

The Apprenticeship Service holds the following information:

  • A list of colleges and providers and their performance records.
  • A list of approved end-point assessment organisations
    Apprenticeship vacancies.
  • A function to allow levy-paying employers to buy apprenticeship training.
  • Non-levy payers will also be able to use the Apprenticeship Service, but only to view information. It is likely that non levy-payers will transition to using it to manage their apprenticeships from 2019/2020.

Insight webinar #9 - a guide to reclaiming your levy

Need to use the DAS, but a little confused? Watch our webinar.

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Financing your programme in more detail

Levy payers

The details and tax requirement around the new apprenticeship levy are complex.

Find the very latest updates

In summary they include:

  • A connected persons rule (as with the Employment Allowance) which means employers with multiple payrolls will only be able to claim one allowance of £15k. However, it will be possible to split the allowance across a group of companies if desired.
  • Pay bill is calculaed based on total employee earnings – all those subject to Class I Secondary National Insurance Contributions. It will not include payments such as benefits in kind. Earnings of all employees will be taken into account.
  • Employers are required to calculate and report their levy amount to HMRC. This will be paid monthly to HMRC, through PAYE
    The £15k levy allowance operates on a monthly basis and accumulates throughout the year i.e. £1,250 per month. Any unused monthly allowance can be carried from one month to the next.
  • Levy payments to HMRC will be allowable for Corporation Tax.
  • Employers paying the levy will receive a 10% top-up to their monthly levy contribution. 
  • Employers taking on an apprentice aged 16-18 will receive an additional £1,000 in government funding. Initially this will be paid via the training provider, though eventually it will go straight to the employer.
  • Employers taking on an apprentice aged 19-24 who has previously been in care or has a Local Education, Health and Care plan will receive an additional £1,000 in government funding. Initially this will be paid via the training provider.
  • Employer levy contributions are available to use via the new Digital Apprenticeship Service. Employers will be able to reclaim their levy contribution via a digital voucher. This is given to the apprenticeship provider to “pay” for training. 
  • Employers have 24 months to spend their levy funding (contributions and government top-ups). Funding will work on a ‘first in, first out’ basis.
  • The voucher covers apprenticeship training, assessment and certification with registered providers only. It does not cover wages or other costs. Registered providers and assessment organisations can be found via the DAS.
  • Each apprenticeship is allocated to a funding band. The upper limit of each funding band will cap the amount of levy funding an employer can spend on an individual apprenticeship. There are 15 funding bands and they vary depending on the type and level of apprenticeships. Both the L3 Insurance Practitioner and L4 Insurance Professional apprenticeships have an upper band limit of £9,000. This amount is meant to cover training, assessment and certification.
  • Firms agree the cost and monthly payments of the apprenticeship with the chosen provider. The monthly payments will be taken automatically from the employer’s digital account and sent to the provider. • Firms will need to sign formal contracts with the provider and the Skills Funding Agency (SFA).
  • If a price is agreed with a provider that is above the funding band upper limit, the employer must meet the additional amount in full (i.e. there is no government support available).
  • As the levy will be collected monthly an employer will not need to have the total amount for the apprenticeship in their DAS account – there only needs to be the funds to cover the monthly amount.
  • 20% of the total cost of the apprenticeship will be held back and taken from the digital account at the end of the apprenticeship. This will be to cover delivery towards the end of the programme and the end point assessment (it is to ensure employers do not overpay if the apprentice does not complete their programme).

Non-levy payers

  • For those firms not paying the levy there is government support available for apprenticeship training. A co-funding system has been introduced. They will pay an amount towards the apprenticeship, with the government contributing the rest.
  • Employers will be expected to negotiate a price for apprenticeship training with their chosen provider.
  • Employers pay 10% of the price for training and assessment and the government funds 90%. The upper limit of the funding band is the maximum price to which the government will co-invest. In many cases, this will represent an improvement to current funding levels.
  • Non-levy paying firms are also eligible for the additional support relating to apprentices aged 16-18 (the additional £1,000 in government funding) and those apprentice aged 19-24 who have previously been in care or has a Local Education, Health and Care plan (additional £1,000 in government funding).