Apprenticeship levy: How the charge works

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When Budget 2015 announced that the government’s reform of apprenticeship funding would involve a new system of vouchers, many in payroll breathed a sigh of relief, says Terri Bethel of the CIPP.

During the consultation process, it seemed a distinct possibility that the PAYE system would be used to handle apprenticeship funding and concerns were raised at the prospect. However, only a few months later, at Summer Budget 2015, the government revealed that the vouchers will be paid for by a new apprenticeship levy to be collected through PAYE from April 2017. Payroll didn’t escape involvement after all.

So, what is the levy exactly, who does it apply to and how do you calculate it?

What we know about the levy (so far)

What we know so far comes from Budget announcements, HMRC’s policy paper and draft legislation (published in February), and some brief guidance on GOV.UK. Further guidance and final legislation is expected shortly.

The levy will be a 0.5% charge on an employer’s pay bill, which can offset against a new levy allowance. The maximum allowance is £15,000 so an employer with a pay bill of under £3m pays nothing (in theory). The levy is paid to HMRC and goes into the employer’s online apprenticeship account, where it can be spent on apprenticeship learning through digital vouchers.

Budget 2016 confirmed that, in England, the government will add 10% to the funds that employers put into their accounts and that a new employer-led Digital Apprenticeship Service will control apprenticeship funding. However, because skills funding is a devolved policy area, the administrations in Scotland, Wales and Northern Ireland will make their own arrangements (potentially adding complexity for employers with activities in more than one region).

Who the levy applies to

The levy applies to...

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About Terri Bethel


Terri is lead technical material author for the Chartered Institute of Payroll Professionals.


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By mrme89
21st Apr 2016 10:19

Where in the draft

Ignore - I was being stupid.

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