Apprenticeship Levy on employers’ pay bills above £3m a year

From April 2017 all employers with a pay bill above £3m a year will pay a levy to fund apprenticeships. Employers who pay the levy and take part in the Government’s apprenticeship programme can get the levy back plus 10%.

The main things you need to know about the Apprenticeship Levy are:

  1. Only employers who pay more than £3m a year in wages, salaries, commission, bonuses and pension contributions subject to Class 1 employers’ National Insurance Contributions will will pay the levy. It will not be charged on benefits in kind or reimbursed expenses. The system is different in Scotland, Wales and Northern Ireland, so the following refers to England.

  2. The levy affects all large employers, including charities, local authorities, public services and connected employers, such as joint ventures or groups of companies.

  3. The levy will be paid monthly through PAYE, so you will pay the levy in any month when your pay bill is over £250,000. If your annual pay bill in the tax year is below £3m you will get it back.

  4. The levy is charged at 0.5% on earnings above £3m, so that if your annual pay bill is £3.5m you will pay £2,500 (.5% of £500,000); if it is £5m you will pay £10,000; or £235,000 if it is £50m. Estimate what you will pay here:

  5. The government refers to an ‘allowance’ of £15,000 per tax year: all this means is that only employers with a pay bill above £3m will pay the levy.

  6. Levy payments will be recorded on the Digital Apprenticeship Service (DAS), where you can access your account at any time. The government will add 10% to your fund every month.

  7. You can use your DAS levy account to fund apprenticeships at any level, from starters at level 2 to existing staff for a supervisory or management role (level 3), senior management or degree apprenticeship (levels 4, 5, 6) or even a Masters (level 7).

  8. Funds from your DAS account can only be used for training and assessment of apprentices, not wages, travel, premises, management or other costs of an apprenticeship, and they must be paid to a government registered training provider like UKTD. Levy payments which are not used after 18 months will expire, together with the 10% grant.

  9. The government will pay the training provider monthly, based on training provided, and will also ensure quality though inspection by Ofsted and analysis of data from training providers,

  10. You can get £1,000 through your training provider for everyone who starts an apprenticeship aged between 16 and 18. You can also get extra funding for apprentices aged 19 -24 who have an education, health and care plan provided by the local council or has been in care.

  11. Apprenticeship levy payments will be allowable for Corporation Tax

  12. Employers of apprentices under 25 pay no National Insurance on earnings up to the Upper Earnings Limit (currently £40,000).

UK Training and Development is ready to help employers make the best use of the levy to train employees. Please contact us by email: or call 01442 230 130