The Apprenticeship Levy

The Apprenticeship Levy is a levy on UK employers to fund apprenticeships and is charged at a rate of 0.5% for companies with a wage bill of £3 million or more (English percentage). It is collected through the monthly payroll from levy paying companies and transferred into their apprenticeship levy ‘digital account’ with a government top up. Companies can use funds in their levy account to pay for apprenticeships.

Companies who do not meet the £3 million threshold are referred to as non-levy paying companies. Non-levy paying companies can still benefit from the measures brought in by the Government by utilising something called co-investment. Co-investment is where employers share the cost of training and assessment with the government. The employer pays 5% towards to the cost of apprenticeship training with the Government paying the remaining 95% (up to the funding band maximum).

What is the English percentage?

The English percentage is the proportion of the employer’s pay bill, paid to employees who live in England. This will dictate the amount of funds paid into the employer's levy account.

HM Revenue and Customs (HMRC) calculates the English percentage from the information provided on an employer's pay bill. A company’s latest English percentage will be visible in their levy account.

What is the funding band maximum?

Each apprenticeship is allocated a funding band, recommended by the Institute for Apprenticeships, and decided by the Secretary of State for Education. The upper limit of each funding band is the funding band maximum and caps the maximum amount of funds an employer can use from their levy account towards an individual apprenticeship.

A training provider may charge more than the funding band maximum for an apprenticeship. If this is the case, any amount above the funding band maximum is referred to as top up fees.

What are top up fees?

Top up fees are any amount charged by the training provider for an apprenticeship which are above the funding band maximum for the apprenticeship standard to which the apprenticeship is mapped. These cannot be paid with funds from the employer's levy account; 100% of top fees are payable by the employer from other company budgets.

How do I know if my company is a levy payer or not?

Your HR or finance team should know this as the levy is deducted at payroll.

The cost of an apprenticeship

Each apprenticeship standard is allocated a funding band which determines how much of apprenticeship levy funds can be utilised by an employer for a single apprenticeship. The Institute for Apprenticeships makes a funding band recommendation to the Secretary of State for Education, who takes the final decision. Training providers can charge more than the funding band maximum (top end of the funding band) for an apprenticeship. Any amount above the funding band maximum is referred to as top up fees.

Levy funds can be used for:

  • Training,
  • Assessment.

Levy funds can't be used for:

  • Wages,
  • Statutory licenses to practice,
  • Travel,
  • Subsidiary costs,
  • Work placement programmes,
  • The setting up of an apprenticeship programme.

Other costs to consider:

  • Accommodation (when staying on Cranfield campus, for example),
  • Travel and food expenses,
  • Books and materials (Cranfield has a library which students can use to take out the books they require).

Paying for an apprenticeship

Employees from both levy paying and non-levy paying employers can access apprenticeships at Cranfield but how they are paid for will differ. Levy paying employers will utilise their accounts on the apprentice service whereas non-levy paying employers will need to sign a payment schedule with the training provider and pay directly to the training provider. Both levy paying and non-levy paying employers will also be required to sign a payment schedule and pay directly to the training provider any top up fees.

Levy paying employer

A levy paying employer will be able to utilise their apprenticeship service account to fund 100% of apprenticeship fees, up to the funding band maximum. The employer also will pay 100% of any top up fees, which will be split by the duration of the programme (in years).

Non-levy paying employer

A non-levy paying employer will pay 5% co-investment for apprenticeship training, up to the funding band maximum. The employer also will pay 100% of any top up fees, which will be split by the amount of years the programme runs for.

Levy paying employer example:

£27,000 apprenticeship (2 year programme)

£18,000 funding band maximum

£27,000 - £18,000 = £9,000 top up fees

(£9,000 / 2 [years] = £4,500 top up fees, per year)

Result

£18,000 funded by the employer's apprenticeship service account, via monthly instalments

£4,500 top up fees paid to Cranfield at the start of year one

£4,500 top up fees paid to Cranfield at the start of year two

Note: 20% of the £18,000 is held back by the Education and Skills Funding Agency (ESFA) with this being payable to Cranfield on completion of the End Point Assessment (EPA). If there were no issues with payments, this would result in 24 equal payments of £600 (=£14,400 [80% of £18,000]); with the final £3,600 (20% of £18,000) payable on completion of the EPA.

Non-levy paying employer example:

£27,000 apprenticeship (2 year programme)

£18,000 funding band maximum

5% of £18,000 = £900 co-investment

£27,000 - £18,000 = £9,000 top up fees

(£9,000 / 2 [years] = £4,500 top up fees, per year)

Result

£900 co-investment paid to Cranfield at start of year one

£4,500 top up fees paid to Cranfield at the start of year one

£4,500 top up fees paid to Cranfield at the start of year two


The Apprenticeship Service

The Apprenticeship Service is responsible for overseeing all apprenticeship funding in England. Any employer wishing to take advantage of the apprenticeship programme is required to set up an account.

The account is used to:

  • Get apprenticeship funding,
  • Find apprenticeships,
  • Manage chosen training providers,
  • Recruit apprentices,
  • Add and manage apprenticeships.

In order to register for an account, you will need the following:

  • An email address you have access to,
  • The Government Gateway login for your organisation (or you can use the accounts office reference number and employer PAYE scheme reference number if your annual pay bill is less than £3 million),
  • Authority to add PAYE schemes to the account,
  • Authority to accept the employer agreement on behalf of your organisation.

You will be asked to:

  • Create an account,
  • Add a PAYE scheme on behalf of your organisation,
  • Accept the employer agreement with the ESFA.

Full information for both levy and non-levy paying employers and how to set up your apprenticeship account can be found on the UK Government website. Once an account has been established we will work with you to add your apprentices to the relevant apprenticeship standard.