How Non-Levy Employers Can Use Apprenticeships

Wondering how you can use the apprenticeship levy even if you don’t pay levy tax?

We’re here to explain it for you simply!

Companies with an annual pay bill of over £3 million must pay levy tax, but can those who don’t pay levy tax still hire an apprentice?

We’re here to help you find out how… and why!

What is the apprenticeship levy?

The Apprenticeship Levy is:

 A tax on UK employers with a pay bill over £3 million each year and is charged at 0.5 per cent of the employer’s annual pay bill. 

Levy payments are made monthly to HMRC through the PAYE process and held in an Apprenticeship Service account. They can then be spent on apprenticeships for new or existing staff.  

The apprenticeship levy is there to essentially fund apprenticeship training.

What is a non-levy employer?

If your annual wage bill is less than £3 million, you are a non-levy employer. 

This means you do not have to pay into the apprenticeship levy and will instead be eligible for funding from the government towards apprenticeship training costs. 

Why should non-levy employers use apprenticeships?

Apprenticeships are a great way for SMEs (often non-levy employers) to grow their business. 

Apprenticeships are great because they:

• Improve productivity internally with new skills and confidence
• Grow skills within the organisation to match your exact needs
• Improve your reputation with clients and consumers
• Give you a competitive advantage when recruiting new talent
• Have funding incentives that make them cost-effective

Read the full article 5 reasons every business should recruit an apprentice.

How much do apprenticeships cost a non-levy employer?

Non-levy employers are eligible for 95-100 percent apprenticeship funding from the government.  

Non-levy employers can get 95 per cent of their apprenticeship training fees funded by the government if: 

• They have an annual wage bill below £3 million 
• They have over 50 employees and hire an apprentice aged 16+ 

OR 

• They have fewer than 50 employees and hire an apprentice aged 19+.

Non-levy employers can get 100 per cent of their apprenticeship training fees funded by the government if: 

• They have an annual wage bill below £3 million 
• They have fewer than 50 employees and hire an apprentice aged 16-18. 

For more details about apprenticeship funding eligibility and requirements, read our article on apprenticeship funding rules.  

How much do non-levy employers pay apprentices?

The cost of the apprenticeship training will be mostly- or fully-funded by the government. However, even as a non-levy employer, you will still be responsible for paying wages to your apprentices.  

As an employer, you must pay apprentices at least the minimum apprenticeship wage rate of £4.81 if they are under 19 OR over 19 and in their first year of the apprenticeship.  

If your apprentice is over 19 and has completed the first year of their apprenticeship, you must pay them at least minimum wage for their age.

Learn more about apprenticeship wages. 

What can non-levy employers use apprenticeships for?

Non-levy employers and levy-paying employers can:

Use apprenticeships for training new members of staff and for upskilling any existing staff members. 

As a non-levy paying employer:

You may choose a sector-specific apprenticeship (e.g. construction apprenticeships).

Or:

You can choose to train staff with specific business skills that are lacking in your company (e.g. customer service apprenticeships).

Apprenticeship incentives for non-levy employers

On top of the government contributions that non-levy employers can get for apprenticeship training, you may also be eligible for additional grants and incentives. 

The government is currently offering a £1,000 grant to any small business that takes on an apprentice aged 16-18 (or up to 25 with an EHAC plan).  

Depending on your location and sector, you may also be eligible for additional grants from your local authority or industry-specific boards. 

How many apprentices can a non-levy employer have?

There is no limit to how many apprentices a non-levy employer can have at once. 

However:

You must ensure that you can provide a rich learning environment for all your apprentices and afford any costs not covered by government funding. 

Non-levy employers and small businesses are integral to the growth and development of the future workforce. 

Apprenticeships are one of the best ways for non-levy employers to grow their business and train employees. 

Ready to get started?

Recruit an apprentice with the help of our experienced team or get in touch on 0370 218 8943 to get your questions answered