Apprenticeship Funding Reforms for Levy Paying Employers

What is the apprenticeship levy?

The apprenticeship levy will be introduced to all large employers who have an annual payroll in excess of £3m, with the first payments due in May 2017 through Pay As You Earn (PAYE).

The levy will need to be paid, regardless of whether employers use funds to purchase apprenticeships.

How the levy is worked out

Employers with an annual payroll of over £3m will pay 0.5% of their payroll bill into their levy account.  They then receive an allowance of £15,000 from the Government.


Employer of 250 employees, each with a gross salary of £20,000 per annum.

Pay bill: 250 x £20,000 = £5,000,000

Levy sum:  0.5% x £5,000,000 = £25,000

Less allowance of £15,000 = £10,000

Therefore, the levy payment by the employers = £10,000

Key details

– Levy-paying employers will have a digital account, on the Digital Apprenticeship Service, and will be able to see their levy contributions coming in monthly and accumulating over time.

– The Digital Apprenticeship Service will show the employer all training providers offering the apprenticeship they require. Once the training provider has been selected, a contract starts and levy funds will be transferred from the employers account to the training provider.

– Levy payment has to be used to pay for apprenticeship training, applicable for both new recruits and existing staff.

– Employers who use all of their levy allowance can top up their digital accounts. In this instance, employers co-invest 10% of the costs, with the Government paying the remaining 90%.

– Any unspent levy funds will expire after 24 months. This also applies to top ups.

– Employers will be able to transfer their levy funds to other employers in their supply chains, sector, or to Apprenticeship Training Agencies, in 2018.

– A grant of £1,000 from Government will be paid to employers when they take on 16-18 year olds, and 19-24 year olds who were in care or who have an Education and Health Care Plan.

Information source:  Weston College

(15th February 2017)