Apprenticeship Levy

Here at Alder Training, we pride ourselves on supporting both our learners and the companies that we work alongside.

The Apprenticeship Levy is starting at the beginning of April. Under this new government initiative, most employers will have to contribute in some way to the cost of training. For small to medium businesses, the cost will be 10% towards the training with the government contributing the remaining 90%. Large companies with a pay bill of £3 million will have to pay for their training through their ‘levy pot’.

We understand that these changes can seem daunting but we are here to help you every step of the way.

Allocating Funds In Your Digital Account To Buy Training

Once you have selected Alder Training as your approved provider, your digital account will automatically withdraw payments and send the fees directly to us. The cost of the training is spread evenly across the lifetime of the apprenticeship.

The government have indicated that initially as the Apprenticeship Levy launches, the payments will be taken on a monthly basis. The government have plans to give more flexibility over the way payments leave your account.

Along with the credits that you make from the Levy, the government are also offering a 10% top-up to your digital account. Therefore, for every £1 that enters your account, you will get £1.10 credited.

Non-Levy Paying Employers

Small to medium companies with a pay bill under £3 million will not be required to pay the levy. As the new system launches, you will need to choose an approved training provider such as ourselves.

We will then agree a price for the training and assessment of your apprentices which will be paid through co-investment with the government.

The annual rate will be set each year, for the amount of money that you will need to pay in addition to the proportion the government will contribute.

What Is The Apprenticeship Levy?

In April 2017, the government are changing the way in which apprenticeships in England are funded. Some employers will be required to contribute to a new apprenticeship levy.

The Apprenticeship Levy is a compulsory payroll tax for UK based employers which has been introduced to encourage employers to actively support apprenticeships. The Levy will increase annual spending on apprenticeships to £2.5 billion a year.

Employers operating in the UK with a paybill of over £3 million per annum will be required to contribute. Allowing businesses to recruit and train existing staff using apprenticeships which will provide valuable skills within your business.

The amount of Levy that is paid into the service account will then become available to spend on apprenticeship training in England.

It is important to note that any apprentice that has been accepted onto an apprenticeship programme prior to April 2017 will continue to be funded for the full duration of the programme under the old guidelines.

Funds in your digital account will be assigned an expiration date, these must be spent within an 18-month window after they have entered the account before they expire.

How the levy will affect me?

The national apprenticeship programme is expanding through

funding from the Apprenticeship Levy.

The Levy will apply to all large organisations with an annual payroll of over £3 million per annum regardless of whether apprentices are already employed.

Employers in the UK will pay at a rate of 0.5% of the payroll costs through PAYE alongside Income Tax and National Insurance deductions.

An allowance will be allocated and as such, employers will not pay the first £15,000.00 of the Levy, this effectively means that the Levy will only be payable of payrolls in excess of £3 million per year.

All employers will be supported by the government with regards to the Apprenticeship training.

Public sector organisations will also pay the Apprenticeship Levy; they fall into the same qualifying criteria with only certain services being ring fenced.

Calculating What You Owe

The Apprenticeship Levy is charged at a rate of 0.5% of your annual pay bill.

Calculating what you owe for the first month of the tax year:

1. Divide your Apprenticeship Levy allowance of £15,000 by 12. This will give you the monthly equivalent of the allowance.

2. Subtract this figure from 0.5% of your monthly pay bill.

For each of the following months:

1. Calculate your total pay bill for the year to date.

2. Add up your monthly levy allowances for the year to date.

3. Subtract your levy allowance for the year to date from 0.5% of your total pay bill for the year to date.

4. Subtract the amount of the levy you’ve paid in the year to date.

If you begin paying the levy part way through the tax year, you’ll need to calculate how much of your annual allowance has been accumulated in the current year. To do this, divide your full annual allowance of £15,000 by 12 and multiply by the number of months since the start of the tax year. This figure is your allowance for the first month you report the levy.

Any unused allowance can be carried forward into the next month within the same tax year. Employers will then be issued with digital vouchers to enable them to spend their levy on training apprentices. The vouchers can be spent with Alder Training.

How Do We Pay The Levy?

As an employer, the Apprenticeship Levy must be paid every month

through the PAYE process in the same manner that you pay Income Tax or National Insurance contributions.

If you have overpaid Apprenticeship Levy during the year, you will receive a refund as a PAYE credit.

Employers who aren’t connected to another company or charity will have an Apprenticeship Levy allowance of £15,000 per year. This allowance will be offset against the amount of Apprenticeship Levy that will need to be paid across the year. It is not possible to carry over any unused allowance into the next tax year.

Companies or charities that are connected will only have one £15,000 allowance to share between them.

Allocating Your Allowance

Your Apprenticeship Levy allowance can be allocated between all of your PAYE schemes or alternatively amongst your connected companies or charities.

How you decided to allocate your allowance is entirely up to the needs of your individual business. You will need to report how you have allocated the allowance the first time that you pay your Apprenticeship Levy. Unfortunately, the share of the allowance can’t be altered during the tax year.

Should any changes occur during the financial year, you must continue to apply the Levy allowance that was initially allocated at the start of the year. These changes include:

• Becoming a connected employer (merging with or acquiring another company).

• The structure of your company changing, such as de-merging with another company.

All public bodies will be allocated a full apprenticeship allowance as they are not considered to be connected companies. Any public bodies that are charities must follow the rules for connected charities.

NHS trusts and other health service bodies are considered to be companies

and are therefore required to follow the connected companies rule.