From 6th April 2017, all employers that had an annual wage bill of more than £3 million were required to pay the apprenticeship levy. This includes companies or charities connected by the employment allowance, who have an aggregate pay bill of £3 million. The levy is an annual charge equal to 0.5% of the total pay bill, payable each tax month along with other PAYE liabilities.
Subject to meeting a set of specifc criteria, employers can subsequently access funds for apprenticeship training via their Apprenticeship Service Account. A guide to account registration may be found here.
The monthly calculation of the levy liability is based on the total pay bill for the tax month, which may include weekly and monthly pay runs (see example below). Your total pay bill is all payments to employees that are subject to employer Class 1 secondary National Insurance contributions such as wages, bonuses and commissions.
Employers will have an apprenticeship levy allowance of £15,000 each year, equal to £1,250 per month.
A worked example:
£3,800,000 annual pay bill
£316,666,66 monthly x 0.5% levy = £1,583.33 levy liability
Cumulative levy allowance £1,250 (£15,000/12)
£1,583.33 payable – £1,250 allowance = £333.33 payable per month in levy liability
Further information about the apprenticeship levy can be found here.