Apprenticeship Levy

Employers Guide to the Apprenticeship Levy

The Henley College understands that employers have many questions regarding the new Apprenticeship Levy, we hope this guide answers some of these questions…

What is the Apprenticeship Levy?

The way the government funds apprenticeships England is changing.  From April 2017 all employers operating in the UK with an annual pay bill of over £3 million will be required to contribute to the new apprenticeship levy. Employers are being encouraged to use this contribution by investing in training apprentices.

Employers who do not pay the levy will continue to access government funding for apprenticeships.  The government will be asking non levy paying employers to pay 10% of the training costs and they will pay the rest.

The levy will not affect any apprenticeships which start before 1st May 2017.

How do employers pay the apprenticeship levy?

All employers with an annual pay bill of more than £3million each year will need to spend 0.5% of their total pay bill on the levy.  There will be a levy allowance of £15,000 per year which will be offset against the amount you must pay.

You will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.

How much do employers have to pay into the levy?

The levy will be calculated by the proportion of the companies wage bill which is paid to their workforce which live in England.

To calculate how much you will need to pay you will need to:

Work out what your total pay bill is.

    • Your pay bill is made up of the total amount of your employee’s earnings that are subject to Class 1 National Insurance contributions. Employees earnings include any money they make from employment such as:
      • Wages
      • Bonuses
      • Commissions
      • Pension Contributions
  1. Work out what 0.5% is.
  2. Subtract the £15,000 allowance.


Example 1. Levy paying employer

An employer with an annual pay bill of £5,000,000:

Example 2. Non levy paying employer

An employer with an annual pay bill of £2,000,000:

How do employers access funds?

Employers who pay the levy and provide apprenticeships will be able to reclaim their levy contributions through their digital apprenticeship service account. You will be able to register to create an account from January 2017 and use the online tools to familiarise yourself with the service.  The amount being paid into your account will be how much you have available to spend on apprenticeship training.

From 1 May you will be able to purchase training through the digital system.  Once the apprenticeship has started, monthly payments will be taken automatically from your digital account and sent to the provider. The payments will be spread throughout the duration of the apprenticeship. Payments will be made to the provider one month in arrears so the first payment to leave your digital account for training started in May will be in June.

What are Top-ups?

Employers who pay the apprenticeship levy and provide apprenticeships will be eligible for a 10% top-up to the funds you have in your digital account to be able to spend on apprenticeship training in England.  The top-up will be applied to your account monthly, at the same time the funds enter your account. 

Is there an expiry date on the funds in an employer’s digital account?

Funds will expire 24 months after they enter your account unless you spend them on apprenticeship training.  This also applies to the top-ups.

How do employers who do not pay the levy pay for apprenticeship training?

If you do not pay the levy you will not need to use the digital apprenticeship service to pay for apprenticeship training until at least 2018. 

In May 2017, when the new funding system begins you will be able to choose the training you would like your apprentices to receive, an approved training provider register will be available nearer the time. 

The government will be asking non levy paying employers to pay 10% of the training costs and they will pay the rest, up to the maximum amount of funding available for the required apprenticeship.  The 10% will need to be paid directly to the training provider.  Employers with fewer than 50 people working for them will be able to train 16-18 year old apprentices without making a contribution towards the costs of training and assessment up to the funding band maximum.  Instead the government will pay 100% of the training costs for these individuals.  

What happens if an employer does not have enough in their digital account to pay for training?

If you are a levy-paying employer, you may find that the funds in your digital account are not enough to cover the full cost of the apprenticeship training.  If this is the case, you will be asked to make a contribution to the extra cost of the training; this is to be paid directly to the training provider rather than through your digital account.  You will be able to spread this contribution over the duration of the apprenticeship.  The government can provide some support to help you meet the additional costs, up to the maximum amount of funding available for the required apprenticeship.

Can an employer stop payments from their digital account?

You can stop or pause payments from your digital account by using the digital apprenticeship service.  Payments can be stopped if:

What can employers spend their apprenticeship funding on?

Apprenticeship funding can be spent on new apprentices or existing staff.  If you are a levy paying or non-levy paying employer, you can only use the funds in your digital account or the funds provided by the government towards the costs of apprenticeship training and end-point assessment provided by an approved training provider or assessment organisation.

Employers will negotiate the cost of the training with the training provider up to the maximum of the appropriate funding band.

The funding cannot be used for other costs associated with your apprentices such as wages, travel, work placement programmes or the costs of setting up an apprenticeship programme.

What is an apprenticeship?

The rules governing what an apprenticeship is are:

Is there a limit to how much can be spent on apprenticeships?

All existing and new apprenticeship frameworks and standards will be placed within a funding band.  The higher limit of each funding band will be the maximum amount of digital funds an employer who pays the levy can use.  This amount is also the maximum price that the government will co-invest towards when the employer does not pay the levy or if they do not have adequate funds in their digital account. 

Is there any additional support for English and Maths training?

All apprentices have to meet the minimum standard in both maths and English. If your apprentices do not already have these prior to starting their apprenticeship they will need to do an English or Maths course.  The government will pay providers directly for the level 1 and 2 English and Maths training they provide to your apprentices; employers will not be asked to pay for this.

What Next?

The Henley College can help you get ready for the new levy and help maximise your apprenticeship training programmes.


Our apprenticeship team can answer all your queries:


Call:    01491 634167




Attend one of our Employer Levy information network events.


Book for one of our levy representatives to visit your organisation, find out: