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What is the Apprenticeship Levy and who has to pay?

Eve Smith, Training Administration Manager at the Alliance, discusses the upcoming changes to government-funded apprenticeships, and provides information on the governments apprenticeship levy.

The Apprenticeship Levy is a government initiative that was originally announced in the 2015 Summer Budget.  Some employers will be required to contribute to the new levy, and for other employers there will be changes to how apprenticeship training will be funded.

From 6th April 2017 the way that the government funds apprenticeships will change. After this date all employers operating in the UK, who have a pay bill of over £3 million each year, will be required to pay the apprenticeship levy.

These changes will affect both current apprenticeship frameworks (SASE) and the new apprenticeship standards (trailblazers).

Levy paying employers

The levy is charged at a rate of 0.5% of the employers annual pay bill. There is a £15,000 allowance which means that employers will only pay the levy if their pay bill exceeds £3 million per year.

Each month employers will be required to calculate, report and pay the levy through their PAYE process to HMRC.

Once employers have paid the levy they will be able to access funding for apprenticeships through a new digital apprenticeship service account.  Employers will be able to register for their account from January 2017. As funds are received into the account each month they will be available the following month. As payments for training are taken from the digital account monthly, employers will just need enough funds in the account to cover the monthly cost of each apprenticeship they have chosen.

For each £1 that a levy paying employer pays into the account, the government will apply a 10% top up. This means for every £1 paid by the employer, they can spend £1.10 on apprenticeship training.

Employers can only spend funds from their digital account on training delivered by Skills Funding Agency approved training providers and assessment organisations.

Non Levy paying employers

When the new funding system starts in April 2017 you will be able to choose the training you’d like your apprentices to receive using a Skills Funding Agency approved training provider or assessment organisation. 

You can negotiate the price with the provider and spread the cost over the duration of the apprenticeship. You will be asked to pay directly to the training provider, who will be asked to confirm that you have made your contribution.

You pay for this training through co-investment with government which means that you and the government each pay some of the money to the provider. 

There will be a set rate each year for the proportion of the money that employers need to pay and the proportion that the government will pay, up to a maximum amount of funding available for that apprentice.  More information on proposed rates for government support will be confirmed in October 2016.

The digital apprenticeship service is available to both levy and non levy employers to help select a framework or standard, choose a training provider and to post apprenticeship vacancies online.

Funding Bands

All apprenticeship standards or frameworks will be placed in a funding band, this will set the maximum amount of funding that can be used towards training over the duration of each apprenticeship. These funding bands will apply to all employers whether they are levy payers or not.

English and Maths

All apprentices are required to meet a minimum standard of English and Maths depending on the level of their apprenticeship. There are specific qualifications they must achieve. If they don’t already hold these, employers will need to work with the training provider to identify who requires the training. The training provider will be paid for these qualifications directly, you won’t be asked to pay for this element of the apprenticeship programme.  

For more information about the apprenticeship levy visit: