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The Apprenticeship Levy remains a pivotal aspect of the UK’s approach to funding and developing vocational training. Introduced in April 2017, the levy aims to encourage employers to invest in high-quality training for apprentices, address skill shortages and improve productivity across various sectors.
This guide will help provide all the information you need about what the Apprenticeship Levy is, how it works, and what it means for your business.
The Apprenticeship Levy is a tax on employers in the UK to fund new apprenticeships. It applies to all businesses with an annual payroll of over £3 million. The levy is part of the government’s strategy to promote vocational education and create a skilled workforce equipped to meet the challenges of the modern economy.
Employers with a payroll over £3 million must pay the levy, which is set at 0.5% of their annual payroll. The payroll includes all earnings subject to Class 1 National Insurance contributions, such as wages, bonuses, and commissions.
Each employer receives an annual allowance of £15,000 to offset against their levy payment. This effectively means that the levy is only paid on the portion of the payroll that exceeds £3 million. For example, a company with a £4 million annual payroll would pay 0.5% of £1 million, resulting in a £5,000 levy payment after applying the £15,000 allowance.
Funds paid through the levy are held in a digital apprenticeship service (DAS) account, accessible via an online portal. Employers can use these funds to pay for apprenticeship training and assessment costs, ensuring that the money is directly reinvested into the workforce.
The government adds a 10% top-up to the funds in the DAS account. For every £1 an employer contributes, they have £1.10 available to spend on apprenticeship training.
Funds in the DAS account must be used within 24 months. Unspent funds after this period will expire and be reallocated by the government to support other apprenticeship training needs.
Levy funds can be used to cover the costs of apprenticeship training and assessment provided by an approved training provider. This includes:
However, levy funds cannot be used for wages, travel costs, managerial costs, or the costs of setting up an apprenticeship program.
Developing Skilled Workforce – The levy encourages businesses to invest in training and developing their staff, leading to a more skilled and capable workforce.
Addressing Skill Gaps – By focusing on vocational training, the levy helps address skill shortages in industries, such as Accountancy, IT, and Marketing.
Financial Incentives: – Employers can maximise the benefits of their levy payments by strategically planning their apprenticeship programs to align with business goals and workforce development needs.
The Apprenticeship Levy is a vital tool for fostering a skilled workforce in the UK. By understanding how the levy works and strategically utilising the funds, businesses can enhance their productivity and address critical skill gaps through the use of apprenticeships.
If your business could benefit from using a levy payment to help fund the training for an apprentice, feel free to get in touch with us to discuss in more detail.
