The Apprenticeship Levy is a UK tax measure introduced in April 2017 to fund apprenticeship programs and to encourage employers to invest in apprenticeship training.
The key aspects of the Apprenticeship Levy are as follows:
Levy Rate: The levy is charged at a rate of 0.5% of an employer's total annual pay bill.
Pay Bill Definition: The pay bill includes all payments to employees that are subject to employer Class 1 secondary National Insurance Contributions (NICs), such as wages, bonuses, and commissions.
Levy Allowance: Every employer receives an annual levy allowance of £15,000, which is offset against the levy payment. This means the levy effectively applies to employers with a pay bill over £3 million each year, as the allowance covers the first £15,000 of the levy.
Payment and Reporting: Employers report and pay the levy to HMRC through the Pay As You Earn (PAYE) process alongside tax and National Insurance.
Access to Funds: Funds raised by the levy are accessible to employers in England through a digital service account. These funds can be used to pay for training and assessment of apprentices. The government applies a 10% top-up to the funds.
Expiry of Funds: Funds in the digital account expire 24 months after they enter the account if they are not spent on apprenticeship training.
For Employers in Other UK Regions: While the levy is a UK-wide tax, each of the UK nations manages its own apprenticeship programs. Scotland, Wales, and Northern Ireland have different arrangements for accessing and using levy funds.