Who will need to pay the Levy?
All UK employers who have a total employee pay bill above £3m a year will be required to pay the levy, including public and private sector organisations, charities and educational providers such as academy groups and universities.
The levy will be charged at a rate of 0.5% of an employer’s annual pay bill and the employer will have a levy allowance of £15,000 per year to offset against the levy they must pay. This means they will only pay the levy if their pay bill exceeds £3 million in a given year.
The employer will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.
Find out how it works here
How much of the Apprenticeship Levy will you pay?
Employer A: 1,000 employees, each with a gross salary of £20,000
- Annual pay bill: 1,000 x £20,000 = £20,000,000
- Levy applied: 0.5% x £20,000,000 = £100,000
- After allowance applied: £100,000-£15,000 means £85,000 levy payment
Employer B: 500 employees, each with a gross salary of £20,000
- Annual pay bill: 500 x £20,000 = £10,000,000
- Levy applied: 0.5% x £10,000,000 = £50,000
- After allowance applied: £50,000 – £15,000 means £35,000 levy payment
Employer C: 100 employees, each with a gross salary of £20,000
- Annual pay bill: 100 x £20,000 = £2,000,000
- Levy applied: 0.5% x £2,000,000 = £10,000
- After allowance applied: £10,000 – £15,000 means no levy payment
What does the levy mean for SMEs?
Non-levy paying businesses (around 98% of all businesses) will only have to contribute 10% of the costs of an apprentice’s training, with the government paying the remaining 90% through ‘co-investment’.
The government are encouraging businesses to help 16-18 year olds, young care leavers and young people with an Education and Health Care (EHC) plan. If you take on an apprentice who meets these criteria, you will receive a payment to help meet the extra costs of employing them. The government are seeking views on proposals that employers and providers receive £1,000 each.
Companies with fewer than 50 employees will not have to pay anything towards the cost of training 16-to 18–year-old apprentices, young care leavers or young people with an EHC plan.
If you are a SME and would like more information, please use the contact form below to get in touch with us.