All you need to know about the Apprenticeship Levy


What is it?

The Government has set a target of recruiting three million apprentices by 2020, a goal supported by the Apprenticeship Levy introduced in 2017. Not all employers will be affected because it will only be paid on employers’ pay bills over £3 million, but those that are will have to pay 0.5% of their payroll.

The Levy will raise up to £2.8bn per year which will be used to pay for training in companies across the UK. The way in which apprenticeship standards are designed and used by employers is changing as well, with the aim of making apprenticeships simpler and more relevant to the skills needed by the business.

Here are two brief examples to help you understand the amounts involved and the effect of a £15,000 allowance from the Government.

Company A
Annual Pay Bill = £4,500,000
0.5% Levy = £22,500
Less £15,000 Allowance
Cost To Company = £7,500 per year.

Company B
Annual Pay Bill = £2,400,000
0.5% Levy = £12,000
Less £15,000 Allowance
Cost To Company = Nil as Levy total is covered by the allowance.

Is it a good investment?

The Levy and any allowance due will be calculated monthly and collected as part of the HMRC RTI Return (in the same way as Employers NI). The Government will also pay a 10% Top Up on your Levy contributions. This means you will get 110% of what you pay in, so by talking to TDR we can help you plan effectively to ensure you get the full return on your investment.

Non-levy paying employers will share the cost of training and assessing their apprentices with the government – this is called ‘co-investment’.

The co-investment rate has changed for new apprenticeships starting on or after 1 April 2019. You will now pay 5% of the cost of apprenticeship training. The government will pay the rest up to the funding band maximum.

How TDR can help

We can remove the uncertainty by working with you throughout the entire process, right from accessing funding through to designing training and recruiting staff to help drive your business forward.

We will help you manage your online Apprenticeship Account and make sure the training meets all the government rules so that you maximise your entitlement to training.

Remember, there are various ways businesses can utilise their levy funds, one being to recruit an apprentice, but they can also be a highly accessible and affordable means of training existing employees. Developed with employers in mind, each of our courses has been created to match the skills required to excel in a particular role.

What do I need to know?

The government will move from apprenticeship frameworks to standards by 2020. All frameworks will be withdrawn by 2020 to 2021 academic year. The last date for new starts for all remaining live apprenticeship frameworks will be 31 July 2020. All starts from 1 August 2020 will be on new, employer-designed standards which will replace frameworks.

Fifteen funding bands have been created for these apprenticeship standards and depending on the apprenticeship type and level, the 5% contribution from employers will range from £150 to £270. Employers with less than 50 employees will be able to train 16-18-year-old apprentices without paying any contribution towards training.

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