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Apprenticeship Levy

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Apprenticeship Levy
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Payment of the Levy

The levy has been payable since April 2017. Any Apprenticeships started before 1st May 2017 will be funded through to completion on the old funding rules. 

Who will pay the Levy? 

The levy will apply to both public and private UK employers across all sectors with a payroll bill in excess of £3m a year. As an employer with a pay bill of more than £3 million, you’re required to pay the apprenticeship levy. You can manage funds using the apprenticeship service and spend it on training and assessing your apprentices. 

What counts as your pay bill? 

Your pay bill will be based on the total amount of earnings subject to Class 1 secondary NICs. Earnings include any remuneration coming from employment, such as wages, bonuses, commissions, and pension contributions that you pay NICs on but not benefits in kind. 

How much will the levy be? 

It will be set at a rate of 0.5% of the total payroll and will be collected monthly via PAYE. There will be a £15,000 fixed annual allowance for employers to offset against their levy payments. The levy allowance will operate monthly and will accumulate throughout the year. This means you will have an allowance of £1,250 a month. Any unused allowance will be carried from one month to the next. 

What happens if you are in a group of companies? 

Where a group of employers are connected you will only be able to use one £15,000 allowance. The government is intending to amend the Finance Bill 2016 whereby if you are in a group, you must decide what proportion of the levy allowance each employer in the group will be entitled to. 

How do employers get back more than they put in? 

The government will apply a 10% top-up to monthly funds entering levy paying employers digital accounts, for Apprenticeship training in England, from April 2017. All funds entering a levy payer’s account will be increased, so every £1 will be increased to £1.10 in value.

So, what's the impact?

So, what's the impact?

Spending the Levy 

What can Levy funds be spent on? 

Levy funds can only be used towards the cost of Apprenticeship training and end-point assessment with an approved training provider. It can’t be used towards an apprentice’s wages or a wider training programme. If you exceed the funding band maximum, you’ll need to pay for all the additional costs.

How much can employers spend on each apprentice? 

Each Apprenticeship standard will be placed into a funding band. These bands will determine the maximum amount that can be spent on each Apprenticeship from your Levy Account. Apprenticeship Funding Bands can be found here. The upper limit of the funding bands will also cap the maximum price that the government will ‘co-invest’ if an employer does not pay the levy or has insufficient levy funds/ exhausts their levy account to pay for the number of Apprenticeships they want to support/employ and you just pay 5% of the outstanding balance £invoiced monthly and the government will pay the rest (for apprentices that started before 1 April 2019, you need to contribute 10%). This is up to the funding band maximum allocated to each specific apprenticeship. It will be up to employers to negotiate prices with providers, within these funding limits. 

How can employers spend their levy? 

Levy funds once collected by HMRC will be held in your digital ‘Apprenticeship Service’ (AS) account. Employers will be able to direct the funds held in these accounts to ‘approved training providers’ to pay for their Apprenticeship training.

How long will employers have to spend their levy?

Levy funds will expire 24 months after they enter your digital account unless you spend them on apprenticeship training – if you don’t use them, you will lose them. This will also apply to any top-ups in your digital account. For example, funds entering your account in September 2017 will expire in September 2019. Money is spent when it leaves your digital account as a payment to a training provider. The account will work on a first-in, first-out basis. Whenever a payment is taken from your digital account it will automatically use the funds that entered your account first. 

Can employers use the levy to fund existing employees? 

Yes, so long as the training allows them to acquire substantive new skills and the content of the training is materially different from any prior training or a previous Apprenticeship. This same rule applies to employers wanting to put employees on an equivalent or lower level qualification than that they have already achieved. All apprentices are required to complete their training during paid hours and therefore the 20% rule for off the job training is also required for your directly / existing employees.

Can employers use their Levy to fund Apprenticeships in their supply chain? 

Yes, If you have unused apprenticeship funds, you can transfer them to another employer using the apprenticeship service. This will support them to pay for apprenticeship training and assessment. You can find employers who want to receive a transfer by working with employers in your supply chain, getting in touch with employers in your industry, contacting an Apprenticeship Training Agency (ATA), working with regional partners

You can transfer a maximum of 25% of your (non-exhausted) levy funds.
Pointers to help employers prepare for transfers
A practical guide to transfers

Can the levy be used to cover apprentices who signed up pre-May 2017?

No, the latest guidance states that for those apprentices who started pre-May 2017, funding for the full duration of their Apprenticeship will be under the terms and conditions that were in place at the time the Apprenticeship started. Funds in your digital accounts cannot be used to cover these apprentices whether they were signed up under existing frameworks or new Trailblazer standards. 

Will additional payments be made for employing a 16-18-year-old?

Employers can access a £1,000 incentive for taking on a 16-18-year-old. This will also apply to 19-24-year-old care leavers or young adults with additional learning needs. The £1,000 will be paid in 2 instalments in months 3 and 12 of the Apprenticeship; initially, these will be paid to the provider who will pass the money on based on eligibility criteria being met.
Financial Incentives

What happens if I take an apprentice on who needs help with English and maths?

 If you employ an apprentice who needs support with English and maths, additional payments will be made to your training provider to enable you to do this. This will not come out of your levy funds.

How will payments be made to the provider? 

When you agree to buy Apprenticeship training from a provider, monthly payments will be automatically taken from your digital account and sent to the provider. This spreads the cost over the lifetime of the Apprenticeship. You don’t need to have enough funds in your digital account to cover the entire cost of the training at the start. As payments are taken from the digital account monthly, you just need to have enough funds in your account to cover the monthly cost of each Apprenticeship you have chosen. 

Will all funds be taken out monthly? 

No, 20% of the cost of the Apprenticeship will be held back and taken from the digital account at the end of the Apprenticeship. This is a reflection of the fact employers will increasingly move to train apprentices on Apprenticeship standards, where there is an endpoint assessment. 


What will happen in the devolved nations? 

The digital apprenticeship service will support the English Apprenticeship system. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access Apprenticeships. The level of funding available in each levy-paying employer’s account will depend on the proportion of their pay bill paid to their workforce living in England. HMRC will apply a fraction to funds in an employer’s levy pot based on data held about an employee’s home address data. What happens if an employee works in England but lives in Scotland? The government is proposing to simplify the rules and any employee whose registered place of work is England will be eligible for both levy funding and co-investment, regardless of where they reside. They do however have to be undertaking an English approved Apprenticeship framework or standard.

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