Apprenticeship Levy What you need to know

The way the government are going to fund apprenticeship schemes is changing and there will be an Apprenticeship Levy requiring all employers with a pay bill of over £3 million to invest in the scheme.

From 6 April 2017, as an employer you will need to pay the Apprenticeship Levy each month if you

  • Have an annual pay bill of more than £3 million
  • Are connected to the other companies or charities for Employment Allowance which in total have an annual pay bill of more than £3 million

(Your annual pay bill is all payments to employees that are subject to employer Class 1 Secondary NIC such as wages, bonuses and commissions. Your pay bill doesn’t include earnings of employees under the age of 16, employees who aren’t subject to UK NIC legislation or earning on which Class 1A NIC are payable such as benefits in kind.)

There is an Apprenticeship Levy Allowance of £15,000 per year. To calculate what you owe, the Levy is charged at 0.5% of your annual pay bill, less the allowance:

For the first month of the tax year

  • Divide your Apprenticeship Levy allowance by 12
  • Subtract this figure from 0.5% of your monthly pay bill

For each of the following months

  • Calculate your total pay bill of the year to date
  • Add up your monthly levy allowances for the year to date
  • Subtract your levy allowance for the year to date from 0.5% of your total pay bill for the year to date
  • Subtract the amount of the levy you’ve paid in the year to date

If you begin paying the levy part way through the tax year, you’ll need to calculate how much of your annual allowance has been accumulated in the current year. Divide your full annual allowance by 12 and multiply by the number of months since the start of the tax year. This figure is your allowance for the first month you report the levy.

Any unused allowance can be carried forward into the next month within the same tax year.

You will need to report your apprenticeship levy each month using your Employer Payment Summary and include:

  • the amount of the annual Apprenticeship Levy allowance you’ve allocated to that PAYE scheme
  • the amount of Apprenticeship Levy you owe to date in the current tax year

The levy is paid through the PAYE process.

There is further advice on how to allocate your allowance, record keeping, if you run a franchise, and many other business sectors on the HMRC website….

If you would like advice on this or any other issue, please contact us for a free initial meeting.

Barnstaple 01271 375271 Bideford 01237 471881


Created with images by Ausgrid photos - "Apprentice class of 2014"

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