Last Updated: Friday, November 25, 2016

Apprenticeship Levy – What you need to know

From 6th April 2017, all businesses with a wage bill of more than £3 million will be required to pay the Apprenticeship Levy.

The Apprenticeship Levy is the government’s initiative to fund three million places for apprentices by 2020, paid for by larger employers. It means that there will be changes in the way that all apprenticeships are funded which affects all businesses, large or small, who employ apprentices.

Employers with an annual pay bill of more than £3 million will need to spend 0.5% of their total pay bill on the Apprenticeship Levy. However, they have introduced a ‘levy allowance’ of £15,000 per year. This means that the total amount you need to spend is 0.5% of your pay bill, minus £15,000.


To calculate how much Levy you will pay, follow these steps:

  1. Work out what your total pay bill is. Your pay bill is made up of the total amount of your employees’ earnings that are subject to Class 1 National Insurance contributions.
  2. Work out what 0.5% of your total pay bill is.
  3. Subtract the £15,000 allowance.


An employer with an annual pay bill of £5,000,000 will need to spend £10,000 on the Levy:

levy sum: 0.5% x £5,000,000 = £25,000

subtracting levy allowance: £25,000 - £15,000 = £10,000 annual levy payment

The Apprenticeships Levy is a payment that will be collected from large employers in both the public and the private sectors; paid to the HMRC via PAYE returns.

The purpose of the Levy is to encourage employers to invest in apprenticeship programmes and to raise additional funds to improve the quality and quantity of apprenticeships. The Apprenticeships Levy paid by businesses can also be accessed by the very same businesses to fund apprenticeship training for new or existing employees.



This presents a number of opportunities for SMEs who can take advantage of the funding available. In a nutshell, employers not paying into the Levy won’t have to contribute to the fund, but can draw from it.

In practical terms, the Levy means:

  • Non-levy paying employers will contribute 10 per cent of the cost of training an apprentice, and the government will pay the remaining 90 per cent.
  • Businesses with under 50 employees won’t pay anything if they employ apprentices under the age of 19, and will receive a £1,000 payment
  • For those already employing apprentices, any apprentice starting before 1 May 2017 will be funded for the full duration under the terms and conditions that were in place when the apprenticeship started.

As the largest provider in North Lincolnshire for apprenticeships, we can help you to get ready for the Levy and maximise your funds. As a local SME we can also support you to understand the funding changes, potential costs and how to maximise the benefit an apprentice can bring to your business. Contact Customer Services to find out how we can help you recruit apprentices on 01724 281111 or by emailing

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