Apprenticeship levy: what you need to know
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The apprenticeship levy is a levy on UK employers to fund new apprenticeships.
The levy applies to employers who have annual paybills in excess of £3 million, and is charged at a rate of 0.5% of the employer’s paybill.
The employer receives an allowance of £15,000 to offset against their levy payment.
It came into force in April 2017.
Why do it?
According to the Apprenticeship Levy policy paper, the Government wants to:
- invest in human capital
- develop vocational skills
- increase quality and quantity of apprenticeships.
The Government has committed to creating an additional 3 million apprenticeships by 2020. The levy is designed to help lever and support quality training.
The levy is paid by employers who have annual paybills in excess of £3 million. (Your annual paybill is all payments to employees that are subject to employer national insurance contributions such as wages, pension contributions and bonuses.)
This is likely to apply to:
- local authorities
- multi-academy trusts
- larger standalone academies.
Maintained schools below the £3 million threshold are likely to still pay if they come under the overall local authority wage bill. However, there has been some confusion in regards to the status of LA/community schools when it comes to paying and benefiting from the levy (see the BBC article Apprentice levy 'will harm small council schools' for some detail), so check with your LA as to their arrangements. For example, some LAs operate a central system for appointing apprentices and accessing the funding.
Similarly, while individual schools within a MAT may have a payroll below £3 million, the overall MAT will be subject to the apprenticeship levy and the 0.5% tax deducted. The MAT will receive the £15,000 allowance.
The DfE have estimated that over 16,000 schools (three quarters of the total) will pay a combined apprenticeship levy of around £110 million (see paragraph 33 of the Schools’ costs: technical note).
So, in practice, the majority of schools pay the levy, and should ensure they take account of this cost when setting the budget.
Note: in the case of Voluntary Aided (VA) and Foundation schools, the governing body is considered to be the employer, rather than the LA. Therefore they only pay the levy if they have a paybill of over £3 million.
In England, control of apprenticeship funding is put in the hands of employers through the digital apprenticeship service; employers need to register to manage apprenticeship funds.
Once an employer has declared their levy to HMRC, they can access funding for apprenticeships through the digital apprenticeship service account.
All employers can use the service to choose training providers and assessors, post vacancies and find frameworks and standards.
Employers who pay the levy can use the service to pay for training and set prices with providers.
The government applies a monthly 10% top-up to the funds in your account.
Employers have 24 months to spend the funds in their digital account.
According to the DfE, an apprenticeship is ‘a genuine job with an accompanying skills development programme’.
- It has to be a real job; could be existing employee or new hire.
- Got to be working towards an approved standard or framework.
- Training must be at least 12 months.
- Apprentice has to spend at least 20% of their time on off-the-job training.
The term apprenticeship can cover professional development up to level 7 (Masters level).
There are no age restrictions on eligibility for apprenticeship funding.
There are over 500 apprenticeship occupations. Just some of those relevant to schools include:
- assistant accountant
- early years educator
- facilities manager
- HR support
- IT support
- laboratory technician
- operations manager
- teaching assistant.
What else has the government promised?
Other apprenticeship-related commitments from the government include:
- 100% of training costs will be paid by government for employers with fewer than 50 employees who take on apprentices aged 16 to 18 years old. This will also apply to smaller employers who take on 19- to 24-year-olds who were in care or 19- to 24-year-olds with an education and health care plan.
- £1,000 each from government to employers and training providers who take on 16- to 18-year-olds and 19- to 24-year-olds who were in care or who have an education and health care plan.
- More funding for STEM apprenticeship frameworks and higher pricing of apprenticeship standards to support improved quality.