How does apprenticeship funding work?
Whether you’re a levy-paying employer or a small business (Non-Levy paying) exploring your options for funding apprenticeship training, we will work with you to understand apprenticeship funding, minimise any risk and maximise the benefits of return on your investment.
The Apprenticeship Levy was brought in by the government in May 2017. It is a form of taxation designed to help companies offer more apprenticeships as training opportunities boosting essential training and industry skills.
The levy is a tax paid by employers who have an annual payroll of more than £3 million. These funds are then stored in a digital account which can be accessed to help pay for apprenticeship training costs.
Think of it as a bucket of money set aside for training that you automatically pay into each month from your payroll. Those funds support the development of your new and existing employees, but there is a catch, if you don’t use it… you lose it! It can not be used for anything else.
Levy paying employers
All employers who have an annual payroll of more than £3 million must pay a 0.5% levy on their total payroll, but can access those funds for apprentice training.
Not going to use it or have some left? Did you know you can gift it?
Non-Levy paying employers
Smaller employers - those with a total annual pay bill of less than £3 million – pay just 5% of the cost of their apprenticeship training and the Government pays the remaining 95% through ‘co-investment’.
Still worried about funding? You can ask us about Levy transfers.
HMRC apprenticeship levy rules state that employers that meet the apprenticeship threshold and have a payroll of more than £3 million must pay a 0.5% levy on their total payroll, offset by a £15,000 government apprenticeship levy allowance. This levy is available to spend on apprenticeship training in England. As a bonus, employers will also receive a 10% government top-up in their accounts when they start spending their levy.
It is important to note that these funds can only be spent on apprenticeship training or End-point Assessment and not on any other form of training or worker wages.
After 24 months any unused levy funds expire and return to the government.
Non-levy paying employers can pay 5% of the apprenticeship course cost, and the government will cover the remaining 95% through the process of ‘co-investment’.
If you have any questions about calculating your apprenticeship levy amount, contact our team who will be able to advise and answer any questions you may have.
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All eligible employers will have to pay the 0.5% apprenticeship levy amount at the end of every month. This is collected automatically by HMRC through the employer’s PAYE system alongside income tax and national insurance contributions.
Employers must declare the apprenticeship levy each month from the start of the financial year.
These Levy contributions then appear in a digital account which can be used by the employer to arrange and pay for apprenticeship training.
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The apprenticeship levy can only be used within England, as apprenticeship legislation differs across the devolved nations.
For this reason, levy funded apprenticeships must work at least 50% of their time within England. The amount of levy you can access is directly linked to the proportion of your employees living in England.
Non-levy paying employers can use the levy through a transfer of funds from a levy paying employer.
Employers can transfer up to 25% of their annual levy fund to another business.
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Essentially, it's where one levy-paying employer agrees to transfer a proportion of their levy funds to another employer. They can then use this fund in full to train an apprentice. Want to know how it could work for you?
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Yes it does. Businesses have 24 months to use their Levy before any unused levy funds expire and return to the government.
This is to make sure businesses regularly invest in high-quality apprenticeship training.
When paying for apprenticeship training, the government will always use the oldest funds in your account first to minimise the window for fund expiry.
Non-levy paying employers
Smaller employers (The co-investment option) – pay just 5% of the cost of their apprenticeship training and the Government pays 95%.
This means that non-levy paying companies have the option to access an apprenticeship programme by paying 5% of the cost.
If a levy paying company runs out of funding in their account, the co-investment option is available for them too.
The co-investment rate was reduced from 10% to 5% in April 2019. Non-levy payers are able to reserve a maximum of 10 apprenticeship starts a year.
Employers have 24 months to use their funds once they enter their apprenticeship service account; after this point, their funds will expire.
Levy Transfers
Levy transfers is a scheme set up by Government to support large employers to use their unspent levy funds to support smaller businesses in their sector and/or locally.
Guidance states a large business can currently transfer 25% of their unspent funds to other businesses in their supply chain and/or that support a business’s corporate social responsibility agendas.
If you are a SME or a large employer who has overspent on your levy funds, we have access to various initiatives that can help you with apprenticeship funding.
Apprenticeship levy funding rules
There are apprenticeship funding rules when using the government apprenticeship levy.
These funding rules can be complicated, and training providers (us) and employers (you) need to make sure to follow them correctly.
But don't worry, our team can help at every step.
We work closely with our partners to understand their business needs, with the funding rules to best optimise their levy funds.
Have more questions on funding rules? Get in touch with our team today.
What can employers spend apprenticeship levy funding on?
The funds can only be spent on apprenticeship training programmes or the End-point Assessment, and can’t be spent on wages or non-apprenticeship training programmes.
What happens to unused apprenticeship levy funds?
Your funds will expire 24 months after the date submitted, at which point unused funds will default back to the government.
