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Apprenticeship Levy


This employment guide sets out the rules on the Apprenticeship levy employers will have to pay, subject to their total gross pay bill.

The Law

The Apprenticeship levy will apply to all UK employers in both private and public sectors, payable through PAYE alongside income tax and NICs (National Insurance Contributions) with effect from 6th April 2017. The aim of the levy is to increase the quality and quantity of Apprenticeships in the UK. It has been designed to place employers in the driving seat for paying for and choosing high quality education for apprenticeship training and training providers.

Who does it apply to?

The levy would be payable by employers through their payroll at the rate of 0.5% of their total gross pay bill (excluding benefits in kind), with an annual allowance of £15,000 to offset against the levy payment. This means that the levy would be payable only on a pay bill in excess of £3 million. There would be rules on connected persons so that employers that operate more than one payroll would not be entitled to claim more than one allowance. If two or more companies are (directly or indirectly) connected at the beginning of a tax year, only one of them will be entitled to the £15,000 allowance for that year; it will be up to the companies to decide which of them is entitled to it.

What counts as your pay bill?

Your pay bill will be based on the total amount of earnings subject to Class 1 secondary NICs. Although earnings below the secondary threshold are not counted when calculating an employer’s NICs, they will be included for the purposes of calculating the amount of levy the employer needs to pay.

Earnings include any remuneration or profit coming from employment, such as wages, bonuses, commissions, and pension contributions that you pay NICs on. HMRC will not charge the levy on other payments such as benefits in kind, subject to Class 1A NICs.


How will it work?

From October 2016 a Digital Apprenticeship Service will be simple and available, particularly for smaller organisations to navigate and use. This will enable all employers to select the most appropriate apprenticeships, choose a training provider and pay for apprenticeship training and assessment; this support tool is available whether you have contributed to the levy or not. Employers who pay the levy and are committed to apprenticeship training will be able to get out more than they pay in, through a top-up to their digital accounts. This is accessed using your Government Gateway account.

The Apprenticeship grant for employers currently provides £1500 of funding for the first 5 apprentices aged between 16-24 working towards apprenticeship frameworks. This is to be extended until the end of the 2016/17 academic year to allow support for the transition until the levy funding system is fully in place.

The above is for guidance purposes only.  Particular situations may require modification; if in doubt ring the helpline first.
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