What is the apprenticeship levy?

The apprenticeship levy is a levy on UK employers to fund the costs of apprenticeship training and assessment. The levy will be set at 0.5% of an employer's paybill (the paybill is the employer's total employee earnings subject to Class 1 secondary national insurance contributions). The levy is expected to come into force on 6 April 2017.

Each employer will have an annual allowance of £15,000, which will be offset against the levy. In effect, only employers with a paybill of more than £3 million will be liable to pay the levy (because 0.5% of £3 million is £15,000). Companies and charities that are connected in a group structure will have one £15,000 allowance to share between the group. The levy will be paid through PAYE on a monthly basis. The allowance will also be applied on a monthly basis and any unused allowance can be carried forward to the next month.

The new digital apprenticeship service will distribute the funds raised by the levy for employers to use on apprenticeship training and assessment in England. Separate arrangements for funding apprenticeships apply in Scotland, Wales and Northern Ireland, as this is a devolved matter.

The Government has published guidance for employers on how the apprenticeship levy and the new funding system will work.