The Apprenticeship Levy
Since April 2017, employers with an annual UK wage bill over £3m are able to use the Government’s new Apprenticeship Levy to cover their apprentices’ training costs.
What is the Apprenticeship Levy?
In April 2017, funding for apprenticeships were made available to employers through the Government’s new ‘voucher’ scheme. Employers contributing 0.5% of their total UK Salaries to HMRC will receive an allocated number of vouchers.
The employer will then be able to choose who they engage to train their apprentice and give them the funding.
Ada will ask for employers to contribute the full £18,000 that is the funding cap for the Level 4 Software Developer Apprenticeship standard over two years. This funding is paid to Ada through the Digital Apprenticeship Service on a monthly basis to cover the costs of training apprentices.
Is my company paying the Apprenticeship Levy?
From April 2017, all employers with a employee pay bill* of over £3 million pay in 0.5% to the Apprenticeship Levy, collected monthly via PAYE, which they can claim back by hiring apprentices. There is an annual levy allowance of £15,000 to reduce the levy payments.
Connected companies combine their pay bill to determine whether they pay the levy and receive a single £15,000 levy allowance to share across the connected companies.
Example: Annual calculations for a levy-paying employer with 250 employees, each with a gross salary of £20,000
|Employee pay bill:||250 × £20,000 = £5,000,000|
|Levy payments: ||£5,000,000 × 0.5% = £25,000|
|Levy funds after allowance:||£25,000 − £15,000 = £10,000|
The employer in the above example will have £10,000 in levy payments that can be put toward apprenticeship training costs at Ada.
When can I start spending my levy?
You can already start using it! Levy payers are able to see funds appear in digital accounts monthly, a few working days after you have confirmed your pay bill and levy contribution to HRMC for the previous month. Levy funds will expire 18 months after they enter an employers’ digital apprenticeship service account unless they are spent on apprenticeship training.
What if my company doesn't pay the Apprenticeship Levy?
Non levy paying employers pay 10% of the training costs, with the government covering the remaining 90%.
Are there any additional costs?
All training costs are covered as above, including tuition, training, workshops and end-point assessments. The employer pays the apprentice’s salary, and we advocate a salary in the range of £18k - £22k for the duration of the apprenticeship.
Some employers also add on a London Living Wage top-up or a travel bursary.
Where can I find further information on the levy?
Further information on the levy and a detailed timetable of further information releases are available here.
* Pay bill will be based on total employee earnings subject to Class 1 secondary National
Insurance Contributions (NICs), but includes earnings below as well as above the
secondary threshold. Earnings include any remuneration or profit derived from employment which includes wages, bonuses, commissions, and pension contributions that you pay NICs on. The levy will not be charged on other payments such as benefits in kind, subject to Class 1A NICs.