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The Apprenticeship Levy


From 6th April 2017, employers in all sectors with an annual paybill in excess of £3 million will automatically pay 0.5% of their annual paybill through their Pay As You Earn (PAYE) system alongside income tax and National Insurance. Each employer who pays in to the levy will receive an allowance of £15,000 to offset against their levy payment.

In most cases, the resulting pot of money will be topped up by the government to the tune of an extra 10%.

Example: An employer with an annual pay bill of £5 million:

  • Levy sum: 0.5% x £5,000,000 = £25,000
  • Allowance: £25,000 – £15,000 = £10,000 annual levy payment

If the employer is eligible for a 10% government top-up, they’d then have £11,000 to spend on apprenticeship training.

Calculate what you owe

You can use HMRC’s Basic PAYE Tools to help you work out how much you need to pay.

The Levy forms part of a broader programme of apprenticeship reforms that the Government is introducing. The Government believe that Apprenticeships are good for business and a great way to develop the skills of the workforce both now and in the future. The aim of the Apprenticeship reforms is to deliver more Apprenticeships of a better quality to help improve economic productivity.

The Apprenticeship Levy will be a levy on UK employers to fund new apprenticeships. In England, control of apprenticeship funding will be put in the hands of employers through the Digital Apprenticeship Service (DAS). In addition to the DAS account that forms part of the Digital Apprenticeship Service, employers will also be able to access the following through this service. (This also applies to non-Levy paying employers):

  • Select an Apprenticeship Framework or Standard.
  • Choose VSS to deliver their training requirements.
  • Choose an End Point Assessment provider for the Standards delivery.
  • Post Apprenticeship vacancies.


Apprenticeship Levy funding bands

The government is committed to boosting productivity by investing in human capital and has committed to an additional 3 million apprenticeship starts in England by 2020. The current system of SASE (Specification of Apprenticeship Standards for England) frameworks is in the process of being replaced with a new series of ‘Trailblazer’ standards – designed by employers, for employers.

These aim to provide more relevant training to organisations and the government seeks to replace all existing frameworks by 2020. Both new standards and existing frameworks that have not yet been replaced will be placed into 15 funding bands, the upper limits of which (£1,500 to £27,000) are the maximum cost the government will contribute to individual apprenticeships (see funding band information).


Employers who don’t pay the levy

Employers who do not pay The Levy, and those who want to invest more in training than they have available in their DAS accounts, will benefit from Government funding in a co-investment model.

An Employer cash contribution of 5% towards the cost of Apprenticeship training is an essential part of the Apprenticeship reforms, designed to increase quality and employer engagement.

The Government will fund 95% of the cost of Apprenticeship training, up to the maximum amount of funding available for that Apprenticeship.

You will be able to agree a payment schedule with VSS and spread your payments over the lifetime of your Apprenticeship programmes.

In the first year of the new funding system, you will need to pay your co-investment share directly to VSS, and we will need to evidence this before accessing the Government Funded co-investment.

You will need to meet, in full, any costs above the funding band limit for any particular Apprenticeship.

If you have less than 50 employees, you will be able to train 16-18 years old Apprentices, or 19-24-year-old care leavers or those who have an Education, Health and Care plan, without making a contribution towards the costs of training and assessment, up to the funding band maximum. The Government will pay 100% of the training costs for these individuals.