15 Frequently Asked Questions About the Apprenticeship Levy

Apprenticeships Employers Blogs

The apprenticeship levy was introduced in April 2017 – and is still as relevant today - but do you know what it means for your business and the training of apprentices?

This blog is here to answer 15 of your burning questions about the apprenticeship levy, and how Total People can help you make the most of your apprenticeship levy funds.

1. How does the apprenticeship levy work?

The apprenticeship levy is a tax that UK businesses have to pay. These tax funds are added into a pot that is then used to fund apprenticeships for the employer. This ensures that businesses have enough funds to train and upskill their new workforce.

2. Is the apprenticeship levy compulsory?

The apprenticeship levy is a compulsory tax for UK business who have a pay bill OVER £3 million each year. If you have a business that has a pay bill UNDER £3 million a year, you are exempt from the levy tax.

3. When was the apprenticeship levy introduced?

It was launched in April 2017 as a component of the Government's apprenticeship reforms, aiming to enrol 3 million apprentices by the year 2020.

4. What are the benefits of an apprenticeship levy?

There are many benefits of an apprenticeship levy, including:

Skilled workforce development
Reduced skill gaps
Customised training per industry
High employee retention rates
Positive public image
Diversity and inclusion
Economic growth

5. What does the apprenticeship levy pay for?

The two main objectives of the apprenticeship levy are to cover the cost of training and to support the salaries of apprentices. The levy can also be used by smaller businesses, ensuring they have the opportunity to contribute to the developing workforce.

6. Can I gift my apprenticeship levy funds?

You have the opportunity to transfer 25% of your unused Levy to small enterprises, allowing us to collaboratively promote the growth of skills growth apprenticeships in different industries.

This funding is already allocated within your digital apprenticeship service account, and there are no extra expenses involved. Through gifting your levy funds, you are effectively endorsing apprenticeship training within other companies, assisting them in enhancing skills or hiring new personnel.

This helps support the development of the workforce in the UK, which ultimately benefits all businesses, including yours!

7. Why would an employer want to gift their apprenticeship levy?

Billions of pounds of unspent employer levy funds have been returned to the Treasury, highlighting the need for effective utilisation. Unspent funds expire after two years and are reclaimed by the government. By gifting up to 25% of your unused levy, you can support smaller businesses instead of returning the funds.

This supports wider social and corporate responsibilities that benefit the economy and the workforce. Larger companies with unspent levy funds can gift the funds to industries they work with, that might require a stronger, more skilled workforce through apprenticeship training.

Are you considering gifting your unspent levy funds?

Contact Total People. Our dedicated Levy Gifting team simplifies the process for you through providing access to suitable funding, providing regular reports on gifted funds, and offering comprehensive support.

8. Do I have to pay the apprenticeship levy?

If you are a UK business that has a pay bill OVER £3 million each year, you are legally obligated to pay the apprenticeship levy tax.

9. What happens if you don't pay the apprenticeship levy?

If you meet the criteria, yet fail to pay the levy tax, you could be subject to legal implications depending on the extent of the evasion. It is always better to pay the levy fees and benefit from the apprenticeship funds.

10. Can I claim back apprenticeship levy funds?

You can claim levy funds if you are training apprentices. If you have overpaid your apprenticeship levy during the tax year, you will receive a refund as a PAYE credit.

11. Can apprenticeship levy be used for existing employees?

Yes, if you wish to upskill existing employees and strengthen your workforce, you can use the apprenticeship levy funds.

12. How do I get apprenticeship funding as a non-levy paying employer?

If you employ less than 50 members of staff, the government will pay 100% of the apprenticeship training costs up the maximum band from apprentices aged:

16 to 18
19 to 24 with an education, health and care plan provided by their local authority or has been in the care of their local authority

If you have over 50 employees but do NOT pay more than £3 million per year on your pay bill, you pay just 5% towards the cost of training and assessing an apprentice.

13.How is the levy calculated?

The apprenticeship levy is charged at 0.5% of your annual pay bill. Check out our blog on how the apprenticeship levy is calculated for more information on how to break down your finances.

14. How long do employers have to spend apprenticeship levy funds?

Businesses have 2 years (24 months) from the original deposit date to spend their levy funds before they expire. If the funds have not been utilised after this time period, they are then used by the government to fund apprenticeships for SMEs.