Did you know that £2.7 billion in unspent apprenticeship levy funds expired and returned to the UK government since the levy was introduced? That’s funding that could have trained thousands of apprentices and boosted business growth across the country.
Whether you're a large employer contributing to the levy or a smaller business looking to benefit from levy-gifted funds, understanding how apprenticeships and funding works can open doors to powerful opportunities for workforce development.
In this guide, we break down everything you need to know about the apprenticeship levy - from who pays it and how it's calculated, to how you can use or access funding to train new talent and upskill your team.
About the apprenticeship levy
The apprenticeship levy is a tax on UK employers with an annual wage bill of £3 million or more each year.
It was introduced in April 2017 as part of the Government’s apprenticeship reforms, and is used to fund apprenticeships, support business productivity and grow quality vocational training, upskilling and employment.
If you’re a levy-paying business, you’ll manage your levy funds, manage your apprentices and pay your training provider through an account with the Government’s Apprenticeship Service.
Remember that our expert team has years of experience within the apprenticeship sector and will be there to guide you through the whole process.
What funding can I access through the apprenticeship levy?
Funding for apprenticeships depends on the size of your business.
If you’re a large business with an annual wage bill of £3 million or more, you’ll already be contributing 0.5% of that wage bill towards apprenticeship training costs. This is known as the apprenticeship levy and you have 24 months to use it before it automatically goes back to the Government.
If you’re a business with fewer than 50 employees, you could get 100 per cent of the cost of training paid for by the Government. Small and Medium Enterprises (SMEs) can also access levy gifted funds to pay for apprenticeship training.
What is levy gifting?
This is funding from large employers who have been unable to use some of their apprenticeship contributions. Instead of returning it to the Government, they can ‘gift’ up to 50 percent of this funding for smaller businesses to access and use to train their workforce through apprenticeships.
Trevor Nunes, SPIE UK HR Director, explained why the providers of technical engineering solutions gifted £100k of their unused levy.
He said:
We immediately recognised that this was a great opportunity to work with Total People by gifting £100,000 to help develop the next generation of engineers across the built environment. These funds will support the attraction and retention of talent in a sector that continues to evolve in support of digital transformation and energy transition.
Learn more: Your Apprenticeship Questions Asked and Answered
Paying the apprenticeship levy
The Apprenticeship Levy is paid monthly through the PAYE (Pay As You Earn) system, alongside income tax and National Insurance contributions.
1. Check if you need to pay
You must pay the Apprenticeship Levy if your annual pay bill exceeds £3 million. The levy is charged at 0.5% of your annual pay bill, but you’ll receive a £15,000 annual allowance to offset against the amount you owe.
2. Calculate the levy
Each month, calculate:
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0.5% of your year-to-date pay bill.
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Subtract 1/12 of the £15,000 annual allowance (which is £1,250 per month). This gives you the levy amount due for that month.
3. Report and pay through PAYE
Include your levy payment in your usual payroll submissions using your Full Payment Submission (FPS) and Employer Payment Summary (EPS).
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FPS: Report your pay bill and calculate the levy due.
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EPS: Claim the allowance and report any adjustments.
You must submit this information to HMRC each month, even if you don’t owe anything that month.
4. Deadlines
Payment is due by the 22nd of the following month (or the 19th if paying by post).
5. Use of levy funds
Once paid, levy funds appear in your Apprenticeship Service account, which you can use to fund apprenticeship training and assessment for your employees.
Learn more about apprenticeship funding eligibility here.
As an SME, how can I access levy gifted funds?
Contact Total People apprenticeship provider
If your annual wage bill is less than £3 million, you are a non-levy employer. If you have fewer than 50 employees, you’ll be eligible for 100% funding for individuals aged 16-18.
Our dedicated levy gifting team does all the hard work for you and can help you to access the right funding for your workforce. They can guide you through the entire process and help you every step of the way.
At Total People, we specialise in providing apprenticeships in a wide range of industries. We help guide you through the process, from apprentice recruitment to onboarding. For more information, contact our helpful team today.
