What is the apprenticeship levy?

The apprenticeship levy is a tax paid by employers with a payroll of more than £3 million and is used to fund apprenticeship training. The levy is charged at 0.5% of an employer’s total payroll and is collected monthly through PAYE.

Lifetime Training is an award-winning apprenticeship training provider with the expertise to help you make the most out of your apprenticeship levy. Whether you’re a levy paying employer or a small business exploring your options, Lifetime Training will work with you to understand apprenticeship funding and maximise your return on investment.

Apprenticeship levy explained

The apprenticeship levy was introduced in 2017 as a government scheme to fund apprenticeships. Employers with a payroll of more than £3 million must pay a 0.5% levy on their total payroll, offset by a £15,000 government allowance. The levy is paid monthly through PAYE alongside income tax and national insurance contributions.

Levy contributions appear in a digital account which can be used by the employer to arrange and pay for apprenticeship training. The funds can only be spent on apprenticeship training or End-point Assessment.

After 24 months any unused levy funds expire and return to the government.

Non levy-paying employers can pay 5% of the apprenticeship course cost, and the government will cover the remaining 95% through the process of ‘co-investment’.

If your payroll is more than £3 million, you’re already invested in the levy.

Apprenticeship levy calculator

Use our simple apprenticeship levy calculator to understand how much levy you may be charged.

Enter your total payroll amount as an employer to understand if you are levied or non-levied.

If your levy calculation is £0, there are funding options available to non-levied employers.

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Your levy amount

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Who can use the apprenticeship levy?

The apprenticeship levy can only be used within England, as apprenticeship legislation differs across the devolved nations. For this reason, apprentices funded by the levy must work at last 50% of their time within England. The amount of levy you can access is directly linked to the proportion of your employees living in England.

Unlevied employers can use the levy through a transfer of funds from a levy paying employer. Employers can transfer up to 25% of their annual levy fund to another business, for example a company in its supply chain.

With many years of experience we have all the tools needed to support your success.

Apprenticeship funding for employers

Government contribution for levy payers

The government tops up all levy payments into your digital account by 10%. As an example, for every £100 an employer pays into their levy fund, there will be £110 in the digital account.

Co-investment

Companies with a payroll of less than £3 million do not pay the apprenticeship levy. Instead, non-levied companies can opt to part-fund an apprenticeship programme through the process of ‘co-investment’.

The co-investment option sees employers pay 5% of apprenticeship course costs, with the government contributing the remaining 95%. This means that non-levied companies have the option to access an apprenticeship programme by paying 5% of the cost.

If a levy paying company runs out of funding in their account, the co-investment option is available for them too. The co-investment rate was reduced from 10% to 5% in April 2019.

Co-investment

Companies with a payroll of less than £3 million do not pay the apprenticeship levy. Instead, non-levied companies can opt to part-fund an apprenticeship programme through the process of ‘co-investment’.

The co-investment option sees employers pay 5% of apprenticeship course costs, with the government contributing the remaining 95%. This means that non-levied companies have the option to access an apprenticeship programme by paying 5% of the cost.

If a levy paying company runs out of funding in their account, the co-investment option is available for them too. The co-investment rate was reduced from 10% to 5% in April 2019.

How to use the apprenticeship levy

The levy funds sit in a digital ‘apprenticeship service’ account used by employers to fund apprenticeship training provision. The account is used to manage levy funding, track apprentices, find training providers, or transfer unused funds.

Any levy funds are topped up each month with a 10% government contribution. Any levy funds expire after 24 months, so it is vital to utilise your levy as soon as possible.

Once a programme and training provider has been selected and a price agreed, your provider will be paid out of your digital account every month. Your levy must only be used to pay for apprenticeship training and End-point Assessment, and cannot be used to pay apprentice wages.

Lifetime Training can help you get the most out of your levy investment.

Apprenticeship funding rules

There are a few rules to keep in mind when using the apprenticeship levy to make sure your funds are used correctly.

The funds can only be spent on apprenticeship training programmes or the End-point Assessment, and can’t be spent on wages or non-apprenticeship training programmes.

Your funds will expire 24 months after the date submitted, at which point unused funds will default back to the government.

Levy payers can transfer up 25% of unused annual funds to another employer, including smaller employers in their supply chain.

You can only fund apprentices that work at least 50% of the time in England because of different apprenticeship provision across the devolved nations.

Costs are covered only up to the maximum of each apprenticeship’s funding band.

Forecast your apprenticeship levy with Lifetime Training

Lifetime Training has developed a bespoke tool to provide a detailed forecast of your levy spend over a five-year period. The tool was developed by the Lifetime Finance Team, and considers incremental pay increases, learner fluctuations, and funding incentives to plot client levy usage over five years.

This insight is vital for ensuring a proper return on investment on your levy spend and is just one part of the expert service provided by Lifetime.

With many years of experience we have the tools needed to support your success.

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