How the 2017 apprenticeship levy will affect funding
Currently, training providers are paid directly by government for the apprenticeship training services they provide. Moving forwards, and in line with the apprenticeship reforms that aim to give employers more control over their training and development, the government has implemented a national apprenticeship levy, which will be introduced on 6 April 2017. Levy-paying employers (who have pay bills of £3 million or more) will pay their levy fees directly to HMRC through Pay as You Earn (PAYE) on a monthly basis.
The details are rather complex and are subject to change in the run up to the levy going live (if indeed it does go ahead pending the delayed June 2016 announcement). However, below we have detailed some key funding details that have been publicised so far, courtesy of the Department for Business, Innovation and Skills.
- The apprenticeship levy applies to all employers who operate in the UK.
- You will need to pay the apprenticeship levy if you are an employer, in any sector, with a pay bill of more than £3 million each year. 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.
- The levy will be charged at a rate of 0.5% of your annual pay bill. You will have a levy allowance of £15,000 per year to offset against the levy you must pay. This means you will only pay the levy if your pay bill exceeds £3 million in a given year.
- You will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.
Calculating what you have 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.
- If you have some unused allowance in a month, but paid the levy previously in the tax year, you can receive a credit which you can use to offset against your other Pay as You Earn (PAYE) liabilities. The credit will also reduce the amount of levy paid.
- If you have multiple PAYE schemes and do not use the full £15,000 allowance, you will be able to offset the unused amount against another one of your schemes once the tax year has ended.
How to pay the levy
- You will calculate, report and pay your levy to HMRC, through the Pay as You Earn (PAYE) process alongside tax and National Insurance Contributions (NICs).
- If you have calculated that you will pay the apprenticeship levy, you will need to declare this and include it in your usual PAYE payment to HMRC by the 19th (or 22nd if you report electronically) of the following month.