Will I have to pay the Apprenticeship Levy?

Will I have to pay the Apprenticeship Levy?

There has been a lot of noise about the new Apprenticeship Levy, announced in the Summer budget in 2015 and its introduction is just weeks away. The worry has been that all employers would have to pay it, and that it would be just another ‘tax’ on business. The good news for SMEs is that it is a payment will be made only by larger businesses, with the resulting apprenticeship funding available from 1 May 2017, whether you pay the levy or not. However, where you started training BEFORE 1 May 2017, you must carry on funding training for apprentices under the terms and conditions that were in place at the time the apprenticeship started. For more details of how to access funding take a look at Gov.UK.

Who pays what?

The levy requires all employers operating in the UK, with a pay roll of over £3 million each year, to invest in apprenticeships. From 6 April 2017, the levy will only be paid on the annual ‘paybill’ at a rate of 0.5% in excess of £3 million, and so less than 2% of UK employers will pay it. Each employer will receive an allowance of £15,000 to offset against their levy payment.

Why is it being introduced?

The government has committed itself to an additional 3 million apprenticeship starts in England by 2020 and the Apprenticeship Levy aims to help deliver new apprenticeships. The government information states that the proceeds will support ‘Quality training by putting employers at the centre of the system’ and ‘Employers who are committed to training will be able to get back more than they put in by training sufficient numbers of apprentices’.

How will it be paid?

We have taken this extract from Gov.UK:

The levy will be payable through Pay As You Earn (PAYE) and will be payable alongside income tax and National Insurance. To keep the process as simple as possible ‘paybill’ will be based on total employee earnings subject to Class 1 secondary NICs. It is based on known definitions which employers will already use in relation to National Insurance contributions. For employers paying the levy, the measure is expected to have some impact on administration costs and the impact will vary by employer, depending on the size of their paybill. The policy intention is that they will calculate and pay the levy on a monthly basis. HM Revenue and Customs (HMRC) will engage with employers to discuss and assess the impacts on them.

Take a look at our recent blog on Apprenticeships.

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