The Apprenticeship Levy is coming – What you need to know

The new Apprenticeship Levy is to be introduced by the Government in the UK effective from April 2017.

What does this mean for your business and apprenticeship plans?

Small employers with a pay bill less than £3 million:

  • You will receive a credit of £15,000 from the Government to your apprenticeship account which can be used for apprentice training.

Employers with a pay bill above £3 million:

  • You will be required to pay 0.5% of your gross pay bill (less the £15,000 allowance from the Government) to HMRC each month through PAYE.
  • This 0.5% contribution will then be available to spend through the employer’s electronic apprenticeship account. In addition to this, the Government will contribute a 10% top-up in respect of any funds that the company pays into their account.
  • Employers will have to let HMRC know whether they need to pay the apprenticeship levy each month and include the levy that is due in their usual PAYE payment to HMRC. This should be done by 19th (or 22nd if you report electronically) of the following month.

Any apprenticeship levy payment to HMRC will be allowable for Corporation Tax.

What counts as your pay bill?

The pay bill is based on the total amount of earnings subject to Class 1 secondary NICs. Earnings include any remuneration or profit coming from employment, such as wages, bonuses, commissions, and pension contributions that you pay NICs on.

The Levy is not charged on other payments such as benefits in kind, subject to Class 1A NICs.

How can I use the funds?

The funds can be taken from the online account by way of vouchers to pay for apprentice training. It can only be spent on training from a government-approved training provider.

The funds cannot be used for wages, statutory licences to practise, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or the costs of setting up an apprenticeship programme.

The levy allowance will operate on a monthly basis and will accumulate throughout the year.

Any unused allowance will be carried over. However, the funds will have to be used within a 2-year period, otherwise they will be lost.

If you have multiple PAYE schemes and do not use the full £15,000 allowance, you will be able to offset the unused amount against another one of your schemes once the tax year has ended.

For more in depth information about the levy on the government website.