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The Apprenticeship Levy, what it means to you!

Beginning in April 2017, the Apprenticeship Levy aims to help the UK create three million apprentices by 2020 – but how will it all work?

The levy will require businesses with an annual wage bill of more than £3m to spend 0.5% of that total bill on the levy.

Despite being introduced in April payments aren’t due to start until May 2017. Additionally, it’s up to the employers themselves to notify HMRC each month if their business is eligible to pay-in to the levy. The payment is paid directly to HMRC through the PAYE process.

The Government is also introducing a ‘levy allowance’ of £15,000 per year, which will be subtracted from the 0.5 per cent total.

What’s next for your Business?

Once businesses begin paying into the levy and are registered with HMRC, they will gain access to funding through a ‘digital apprenticeship service account.’ This will enable them to select and pay for Government-approved training, as well as post vacancies for apprenticeships that you may have.

Government-approved training simply means each training provider must pass quality and financial tests to make sure standards are consistent.

The Government tops-up each £1 placed into the scheme, meaning that for every £1 a business pays into their digital account, they get £1.10 back to spend. However, it is worth noting that these funds expire after 24 months.

Initially, the digital accounts will only be accessible to businesses paying into the Apprenticeship Levy, but by 2020 the Government aims to have the program accessible by all businesses.

Calculate What You Have to Pay

Businesses can work out exactly how much they need to pay in three simple steps:

  • Work out exactly what you total wage bill is, including pensions and bonuses
  • Work out what 0.5% of your total wage bill is
  • Take away the £15,000 levy allowance

What’s left is the figure which must be paid into the Apprenticeship Levy.

Apprenticeship Levy Reactions so far

Marcus Mason, Head of Education and Skills at the British Chambers of Commerce, has said that “the Government’s immediate priority must now be to communicate these changes to the wider business community.

“Our recent survey showed that nearly 40 per cent of firms have no understanding, or haven’t heard of the levy – while just over half don’t understand how the funding reforms work. Communicating these changes effectively should be paramount.”

The Government hopes that the levy will become standard practice, just as the Workplace Pension Reforms have become.