Apprenticeship Levy: The Only Guide You Need


The Apprenticeship Levy was announced in the 2015 Summer Budget by then Chancellor George Osborne. The levy represents a fundamental change in the way that Apprenticeships are funded in England. From Spring 2017 all businesses with a payroll over £3 million per year will start paying a 0.5% Levy that will fund apprenticeships in England.

Alongside the Levy, from April 2017 government is changing the way all apprenticeships are funded. Together, these two significant changes will have an impact on all businesses whether they are large or small.

This guide will help you to understand how the Levy will affect your business and how best to tap into apprenticeships to benefit your business.

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Why have an Apprenticeship Levy?

Apprenticeships in England have evolved significantly over the past 50 years and this is the latest update to the system. The new system is structured to encourage all businesses with a payroll over £3 million a year to invest in apprenticeships.

This is good news as there are still problems in England relating to both youth unemployment and the skills gap that apprenticeships are designed to fill. More companies need to be investing in more young people and the Levy should go some way to make this a reality.

How the Levy works?

If your business’s Annual Payroll is £3 million or more than in May 2017 you must start contributing towards the Levy by reporting and paying monthly to the HMRC through PAYE alongside tax and National Insurance Contributions.

The Levy is calculated at 0.5% of payroll, but you get a £15,000 allowance against your total due. This means that if your business had an annual pay bill of £10,000,000 you would pay just £35,000. This is calculated as follows:

(£10,000,000 x 0.005) – £15,000 = £35,000

Group companies are only able to use one £15,000 allowance. So, if you are part of a group your allowance will need to be shared out, and this must be declared at the beginning of the Tax year.

The money you pay into the Levy each month will be allocated to your Digital Apprenticeship Service Account (DASA).

Through the DASA you can choose your apprenticeship training provider, select the apprenticeship framework/standard you require and pay for your apprenticeship training. The government will apply a 10% uplift to funds in the DASA each month. Essentially for every £1 you put into the DASA, you’ll get £1.10 to spend on apprenticeship training with your chosen provider.

It is worth noting that Apprenticeship funding mechanisms are devolved through different systems in England, Wales, Scotland and Northern Ireland. DASA will only operate for Apprenticeships based in England. The amount of your Levy that you can spend through DASA will be assessed on the percentage of your employees living in England based on the addresses of your employees which are already held by HMRC.

You may find that over the course of your apprentices’ training the amount in the DASA is not enough to cover the cost of training provision. The government has agreed to step in and cover 90% of the shortfall for this provision, leaving only 10% for you to pay directly to your training provider. This payment will be dependent on the upper limit of the funding band of the framework/standard that your training provider delivers to your apprentice.

For more detailed guidance on setting up your levy account and using the funds in it, please visit this page.

If your business’s Annual Payroll is £3 million or more than in May 2017 you must start contributing towards the Levy by reporting and paying monthly to the HMRC through PAYE alongside tax and National Insurance Contributions.

The Levy is calculated at 0.5% of payroll, but you get a £15,000 allowance against your total due. This means that if your business had an annual pay bill of £10,000,000 you would pay just £35,000. This is calculated as follows:

(£10,000,000 x 0.005) – £15,000 = £35,000

Group companies are only able to use one £15,000 allowance. So, if you are part of a group your allowance will need to be shared out, and this must be declared at the beginning of the Tax year.

The money you pay into the Levy each month will be allocated to your Digital Apprenticeship Service Account (DASA).

Through the DASA you can choose your apprenticeship training provider, select the apprenticeship framework/standard you require and pay for your apprenticeship training. The government will apply a 10% uplift to funds in the DASA each month. Essentially for every £1 you put into the DASA, you’ll get £1.10 to spend on apprenticeship training with your chosen provider.

It is worth noting that Apprenticeship funding mechanisms are devolved through different systems in England, Wales, Scotland and Northern Ireland. DASA will only operate for Apprenticeships based in England. The amount of your Levy that you can spend through DASA will be assessed on the percentage of your employees living in England based on the addresses of your employees which are already held by HMRC.

You may find that over the course of your apprentices’ training the amount in the DASA is not enough to cover the cost of training provision. The government has agreed to step in and cover 90% of the shortfall for this provision, leaving only 10% for you to pay directly to your training provider. This payment will be dependent on the upper limit of the funding band of the framework/standard that your training provider delivers to your apprentice.

For more detailed guidance on setting up your levy account and using the funds in it, please visit this page.

Apprenticeship Levy Setup →

How will this affect Non-Levy paying employers?

Packaged with the introduction of the Levy, all apprenticeship funding for learners starting from May 2017 will change.  In the same way that Levy payers that exhaust their DASA, non-Levy paying businesses will be asked to make a 10% contribution to the costs of their apprentices’ training which will be paid directly to the apprenticeship training provider. The other 90% will come from the government.

If your business employs 0-49 people, then the government will fully fund any apprentices that you recruit who are aged 16-18 on the first day of their apprenticeship.

This is a matrix to show you how your apprentice’s training will be paid for under the new scheme from April 2017 onwards:

Annual Payroll Number of Employees How old is the apprentice that you are looking to hire? How Apprenticeship is Funded
Greater than £3million per annum(Levy Payers) N/A N/A Funded 100% from Levy funds in your Digital Account. *
Less than £3 million per annum 100+ N/A Are you sure you don’t have a Digital Account?
50-99 N/A Funded 10% by you and 90% through Government.
0-49 19-23 Funded 10% by you and 90% through Government.
16-18 100% Government funded education.

* When levy funds are depleted, training will be funded 90% by government and 10% by employer based on the upper limit of the funding band for the apprenticeship in question.

Can the DASA be used to train existing staff?

Yes. If the member of staff is going to be learning new skills and is relevant in developing their knowledge and career. This should still be aligned to a framework / standard and the learner should be made fully aware of the commitment to training in an apprenticeship programme.

Who is eligible?

Existing Employees and new hires including university graduates, of any age.

Where particular new skills are required, which can be demonstrated through the apprenticeship.

Existing Employees who would like to undertake a qualification at a higher level than their current qualifications.

As long as the apprenticeship will allow the employee to acquire substantive new skills, an apprenticeship at a higher or lower level, can be funded.

Anyone living in the nations but working in England (postcode of place of work). The levy is based on workplace location and postcode.


If you would like to get in touch to discuss the Apprenticeship Levy and how it will affect your business, please submit a form above and we will get in touch right away.

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