Apprenticeship Levy: How it will work

Apprenticeships are set to change in England come April 2017, so it’s best to get clued up now! With the coming changes some employers will be expected to pay an apprenticeship levy and funding for the apprenticeship for all employers is also set to change.

If you’re hiring an apprentice or looking to employ more, here’s a few details you’ll need to know:

• An apprenticeship levy requires all companies with a pay bill over £3million each year to invest in apprenticeships. For the purposes of the levy, an ‘employer’ is someone who is a secondary contributor, with liability to pay Class 1 secondary National Insurance Contributions (NICs) for their employees.
• Your pay bill will be based on the total amount of earnings subject to Class 1 secondary National Insurance Contributions (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.
• You will pay the levy on your entire pay bill at a rate of 0.5%. However, you will have a levy allowance to offset against this. The levy allowance is worth £15,000 for each tax year. This means the levy is only payable on pay bills over £3 million (because 0.5% x £3 million = £15,000). The levy allowance will operate on a monthly basis and will accumulate throughout the year. This means you will have an allowance of £1,250 a month. Any unused allowance will be carried from one month to the next. For example, if your levy liability in month 1 is £1,000 you will not pay the levy and your allowance in month 2 will be £1,500.
• Once you’re paying the apprenticeship levy you will have access to apprenticeship funding which you’ll be able to use to pay for training and assessment for the apprentices.

If you’d like to find out more about apprenticeship levys, please click here.

This information was originally sourced from HMRC’s website.