How does the levy work?

  • As an employer with an annual pay bill of more than £3 million, you pay 0.5% of this towards the apprenticeship levy through PAYE each month.
  • You have an allowance of £15,000, which reduces the amount you need to pay towards the levy.
  • As well as the allowance, the government tops up your levy payments by 10% in your digital apprenticeship service account. So, for every £1 you pay towards the levy, this will become £1.10.

How do you use the apprenticeship levy?

You will use your levy funds through your government apprenticeship service account. This is where you will receive your 10% top up and make payments for training. Companies will lose their funds if they do not spend it within 24 months.

If you are in a group of companies paying the levy together, your group can collect funds in a single account. The government currently allows levy-paying employers to transfer up to 25% of funds entering their apprenticeship service account to other employers. They can transfer funds to any employers or apprenticeship training agency.

What if you do not need to pay the levy?

If your annual pay bill is less than £3 million and you would like to benefit from apprenticeships in your organisation, you will fund this through co-investment. This is where you will contribute 5% to the costs of training and assessing your apprentices, and the government will fund the remaining 95%.

For smaller companies with fewer than 50 employees, the government will pay all the costs for new apprentices aged 16 to 18 and those aged 19 to 24 who are leaving care or have a Local Authority and Healthcare plan.

What if you want to spend more than you have in your account?

When you would like to benefit from more apprenticeships than your account will currently fund, you’ll move onto ‘co-investment’. This is where the government funds 95% of your apprenticeship training and assessment costs, and you pay the other 5% (previously 10%)

What can you use the levy for?

You can use your levy funds for apprenticeship training and end-point assessments for apprentices who work in England for at least 50% of the time. The levy covers your apprentice’s training and assessment within the scope of the framework or standard they are following, and not things like wages and expenses. If the costs of training and assessment exceed the funding band maximum, you will need to pay the difference from your own training budget.

Payment incentives for employers

Employers who take on an apprentice aged 16-18, or an apprentice aged 19-24 who has previously been in care or who has a Local Authority Education, Health and Care plan, will receive £1,000 to help with any additional training and support costs.

The £1,000 will be paid to the employer in two equal instalments at month 3 and month 12 of the apprenticeship.

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