The Apprenticeship Levy
The government plans to provide funding for three million new Apprenticeships by 2020. To help fund this growth, businesses will be expected to pay the Apprenticeship Levy, which aims to raise £3 billion a year.
What is the Apprenticeship Levy?
The Levy is a new tax on employers’ pay bills. It has been set at 0.5% of the annual pay bill, but there will be exemptions for small businesses and an annual allowance to offset against the Levy payment.
When does the Levy come into effect?
It came into effect in April 2017. Payments will be collected by HMRC through PAYE in much the same way as tax and National Insurance is collected. First payments will be made in May 2017.
Follow the links below for more information:
Is my business affected?
If your annual pay bill is £3 million or more, then you will be paying the Levy. You will also receive an allowance of £15,000 per annum to offset against your Levy payments.
If you pay the Levy and employ apprentices you can receive government top-up funds. You will then be able to use digital vouchers to spend your funds on apprenticeship programmes from John Ruskin College.
If your annual pay bill is below £3 million you will not be required to pay the Levy, but you can still employ apprentices via an alternative, co-investment scheme.
It is expected that over 98% of businesses will not be required to pay the Levy, but will be able to benefit from the funds raised.
See the examples below of how the Levy works and follow the links below for full details of the Levy and proposed changes to Apprenticeships.
The table below is a brief overview of how the Levy will affect businesses of different sizes. It is for illustrative purposes only. Full details are available via the links and from the John Ruskin College Apprenticeship team.
|Your pay bill is over £3m||Your pay bill is below £3m, and you have over 50 employees||Your pay bill is below £3m, and you have under 50 employees||Your pay bill is below £3m, and you have under 50 employees|
|You need to take action. Contact John Ruskin College for advice||And you are Co-funded for Apprenticeship training (conditions apply)||And you are Fully Funded for Apprenticeship training of 16 to 18 year olds or/and 19 to 24 year old care leavers or 19 to 24 year olds with an education and healthcare plan (conditions apply)||And you are Co-funded for Apprenticeship training of people 19+ (conditions apply)|
|You will be paying the Levy||You will not be paying the Levy||You will not be paying the Levy||You will not be paying the Levy|
|The Levy will be 0.5% of your pay bill||You will pay 10% of the cost of Apprenticeship training||You will not pay for Apprenticeship training||You will pay 10% of the cost of Apprenticeship training|
If you want to discuss the implications of the Levy on your business then just contact a member of the John Ruskin College Apprenticeship team and we will be delighted to advise you.
Contact the John Ruskin College Admissions and Customer Service Team if you would like further information and to discuss the Apprenticeship Levy and how it could affect and benefit your business.
Just complete the form below or call us on: Telephone: 0208 651 1131
How much will the Levy cost?
Here are three examples of cost calculations to help you assess what the cost of the Levy could be to your business:
1,000 employees, each with a gross salary of £25,000
Annual pay bill: 1,000 x £25,000 = £25,000,000
Levy applied: 0.5% x £25,000,000 = £125,000
After allowance applied: £125,000 – £15,000 = £110,000 Levy payment
500 employees, each with a gross salary of £25,000
Annual pay bill: 500 x £25,000 = £12,500,000
Levy applied: 0.5% x £12,500,000 = £62,500
After allowance applied: £62,500 – £15,000 = £47,500 Levy payment
100 employees, each with a gross salary of £25,000
Annual pay bill: 100 x £25,000 = £2,500,000
Levy applied: 0.5% x £2,500,000 = £12,500
After allowance applied: £12,500 – £15,000 = £0 Levy payment
Follow the links below for more information:
What else is changing?
At the same time as the changes to funding are being introduced, the current Apprenticeship Frameworks will be replaced by Apprenticeship Standards.
Simply put, the new standards will focus on skills for specific roles as opposed to the old frameworks which have been multi-occupational.
The new standards will be assessed at the end of the apprenticeship by an independent organisation. This will be known as the End Point Assessment, which differs from the current frameworks which encompass ongoing assessment.
There will also be changes in the way that the government’s apprenticeship funding system works. For more information see the links below to information about Standards and to the Skills Funding Agency.