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Home > Training Solutions > The Apprenticeship Levy Explained

Now you’re paying the apprenticeship levy, you’ll want to be sure you’re getting the best training possible for your organisation.

At Babington, we work with employers to design and deliver training programmes that are perfectly suited to their needs.

Whether you’re looking to take on brand new apprentices, or develop your in-house training, get in touch to find out how we can help.

How does the levy work?

As an employer with an annual pay bill of more than £3 million, you pay 0.5% of this towards the apprenticeship levy through PAYE each month.

You have an allowance of £15,000, which reduces the amount you need to pay towards the levy.

As well as the allowance, the government tops up your levy payments by 10% in your digital apprenticeship service account. So, for every £1 you pay towards the levy, this will become £1.10.

How do you use the apprenticeship levy?

You’ll use your levy funds through your government apprenticeship service account. This is where you’ll receive your 10% top up and make payments for training. Companies will lose their funds if they don’t spend it within 24 months.

If you are in a group of companies paying the levy together, your group can collect funds in a single account. The government currently allows levy-paying employers to transfer up to 25% of funds entering their apprenticeship service account to other employers. They can transfer funds to any employers or apprenticeship training agency.

What if you don’t need to pay the levy?

If your annual pay bill is less than £3 million and you’d like to benefit from apprenticeships in your organisation, you’ll fund this through co-investment. This is where you’ll contribute 5% to the costs of training and assessing your apprentices, and the government will fund the remaining 95%.

For smaller companies with fewer than 50 employees, the government will pay all the costs for new apprentices aged 16 to 18 and those aged 19 to 24 who are leaving care or have a Local Authority and Healthcare plan.

What if you want to spend more than you have in your account?

When you’d like to benefit from more apprenticeships than your account will currently fund, you’ll move onto ‘co-investment’. This is where the government funds 95% of your apprenticeship training and assessment costs, and you pay the other 5% (previously 10%)


Payment incentives for employers

Employers who take on an apprentice aged 16-18, or an apprentice aged 19-24 who has previously been in care or who has a Local Authority Education, Health and Care plan, will receive £1,000 to help with any additional training and support costs.

The £1,000 will be paid to the employer in two equal installments at month 3 and month 12 of the apprenticeship.


What can you use the levy for?

You can use your levy funds for apprenticeship training and end-point assessments for apprentices who work in England for at least 50% of the time. The levy covers your apprentice’s training and assessment within the scope of the framework or standard they’re following, and not things like wages and expenses. If the costs of training and assessment exceed the funding band maximum, you will need to pay the difference from your own training budget.

Want to find out about taking on an apprentice for your business?

Feel free to give us a call on 01332 345450 or click to get in touch

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