Making the most of the Apprenticeship Levy

The apprenticeship levy was introduced in 2017 to address skills shortages and boost productivity. It was a key pillar of the government’s plan to reach three million apprenticeship starts by 2020.

We look at how the Apprenticeship Levy works.

1. If you’re an employer with an annual pay bill of more than £3m you will contribute 0.5 per cent of that bill to the levy.
2. Your levy contributions are paid on a monthly basis to HMRC through the PAYE process.
3. The government will automatically add 10% to the funds in your account.
4. As a levy paying employer, you’ll need to set up an account on the apprenticeship service. This allows you to receive levy funds for you to spend on apprenticeships, manage your apprentices and pay your training provider.
5. Your levy funds can be used for apprenticeship training and assessment for employees who work at least 50% of the time in England.
6. Apprenticeships are a devolved policy. This means that authorities in each of the UK nations manage their own apprenticeship programmes, including how funding is spent on apprenticeship training. The amount of funds in your levy account will depend on how many of your employees live in England and the proportion of your pay bill paid to these employees. This is known as the ‘English percentage’.
7. Your levy funds have a shelf life of 24 months. If you pay the levy, you should keep track of the funds available in your levy ‘pot’ and remember funds will expire after a 24-month period.
8. You can use your levy funds to pay for training and assessment up to the funding band maximum for the apprenticeship in question. If the costs go over the funding band maximum, you will need to pay the difference with other funds from your own budget.
9. You’re not allowed to use funds in your account to pay for other costs associated with your apprentices (such as wages, statutory licences to practise, travel and subsidiary costs, work placement programmes or the setting up of an apprenticeship programme)
10. As a levy payer, you can support apprenticeships in other organisations by transferring a percentage of your apprenticeship funds to other employers. If you wanted to do this, you can transfer up to 25% of funds.

Managing Director of COPA Apprenticeships, Gareth James, says: The apprenticeship levy can offer many opportunities for businesses. We view it as an investment in employees. Levy funds can be used to boost talent development programmes. They can be used to help employees to enhance and develop their skills, enabling them to progress their careers.

“We hear from employers how this investment boosts business performance. This is borne out in a recent report - 78% of employers reported improved productivity as a result of apprenticeships within their organisation.”