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Levy and funding

The Apprenticeship Levy is a charge introduced by government to help fund their plans to deliver a step change in apprenticeship numbers and their quality. The levy is designed to put apprenticeship funding in the hands of employers and encourage them to invest in and create apprenticeships.

The levy applies to all employers across all sectors in the UK. The rate is set at 0.5 per cent of an employers’ pay bill, collected monthly via Pay As You Earn (PAYE). All employers have an allowance of £15,000, which means that the levy is applicable on pay bills over the first £3 million.

All employers have access to the Digital Apprenticeship Service whether they have paid the levy or not and use it to manage the government funding available to them to pay for apprenticeship training. All Levy-paying employers receive a 10 per cent top-up to their digital accounts funded by government. All employers with a digital account have 24 months to spend their funds, including top-ups, before they expire.

The levy came into force April 2017.

levy flowchart

What can the Levy be spent on?

The government has been very specific about what levy funds can and cannot be spent on. Funds can be used for:

Apprenticeship training and assessment (with an approved training provider and assessment organisation up to its funding band maximum).

Funds cannot be used for:

Wages
Statutory licenses to practice
Travel and subsidiary costs
Managerial costs
Traineeships
Work placement programmes
The costs of setting up an apprenticeship programme.

If your company’s UK paybill is above £3million per year it will pay 0.5% of its payroll into the apprenticeship levy on a monthly basis, and so will be a levy payer. Employers who aren’t connected to another company or charity will have an apprenticeship levy allowance of £15,000 each year. The allowance reduces the amount of apprenticeship levy you have to pay by £15,000 across the year.

These funds can then be used to pay for apprenticeship training via the digital account.

It’s worth knowing: each month’s funds expire after 24 months. For example, May 2017 funds expired in May 2019. The Government tops up the levy payer’s pot up by 10% for the English paybill only.

If your company’s payroll is below £3million per year then it will not pay into the levy. Non-levy paying employers can still send their staff on an apprenticeship and share the cost of training and assessing their apprentices with the Government - this is called ‘co-investment’. You will pay 5% towards to the cost of apprenticeship training and the Government will pay the other 95%, up to the funding band maximum.

You can only spend your apprenticeship funding on the training costs of approved apprenticeship standards or frameworks.
For staff on apprenticeships who live in England (or whose workplace is in England for 50% of their apprenticeship) or have lived in the EEA for 3 years, where a visa is issued, the apprentice must have a visa and employment for the full duration of the apprenticeship.
Your training provider must be published on the Register of Apprenticeship Training Organisations. LSBU is on this Register.
When the apprenticeship requires, an End-point Assessment organisation on the Register of End-Point Assessment Organisations.
Every apprenticeship has a funding cap - this sets the maximum levy or co-funded investment that can be made for this apprenticeship.
If the cost of the Apprenticeship is above the funding cap, the employer must pay any additional costs as agreed with the training provider.
The main provider is the funding route for all apprenticeship funding.

There are additional £1,000 incentive payments paid direct to you for certain categories of apprentice. These are apprentices who are either aged 16–18 or 19–24 and have previously been in care or have a Local Authority Education, Health and Care plan in place. Businesses with fewer than 50 employees can benefit from the small employer co-investment waiver.

Incentive payments come to the University via the government and once the University receives this, the University pays the employers. The money comes in two instalments: 90 days after the start (50%) and 365 days later (50%) for the 16–18 year olds.

Identifying skills gaps – The levy represents a big opportunity for you to identify skills gaps in your organisation and use levy funds to help fill them.
Upskilling existing staff – The levy also represents an opportunity to provide training to existing staff members to improve their current skills or learn new ones.
Developing new apprenticeship standards if there are gaps – As the government makes the transition from apprenticeship frameworks to the new apprenticeship standards it is important that employers consider if the right standards are in place, whether there are any gaps in provision and how they can use the trailblazer programme to develop new ones.
Working with supply chains and other employers to encourage levy spending – There is no ring-fence in place for the share of the Levy that London generates, so any unspent levy funds will be recycled elsewhere in the system. It is important that boroughs use their leadership role and contacts with business to encourage them to spend their levy funds on recruiting apprentices and training existing staff before their funds expire and are reallocated elsewhere in the system.
Working with other London boroughs on developing new standards, delivering economies of scale, identifying common skills or jointly procuring training for more specialist roles.

Further information

The Government has produced further information on apprenticeship funding.

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Levy and funding

What can the Levy be spent on?

Levy payers

Non-levy payers

Small employer co-investment waiver

Funding bands

Funding rules

Funding incentives

What are the opportunities for employers?

Further information

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