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What is the apprenticeship levy?

The apprenticeship levy is a tax on UK employers used to fund apprenticeships.

The amount is paid at a rate of 0.5% of employers with an annual pay bill of more than £3 million. This is only a small percentage of UK employers (around 2%), yet this tax has supported approximately 50% of all apprenticeships.

Want to know how much your company’s apprentice levy is? Use our handy calculator.

First introduced at the start of the 2017/18 tax year, the apprenticeship levy created a fund allowing more apprenticeships than ever to be developed and sustained. By 2019, the apprenticeship levy had supported 310,000+ apprentices, with investment rising to £2.5 billion the same year. This sustainable funding has enabled companies to offer more diverse and specified apprenticeship programmes, helping to close the skills gap and boost the economy. All UK companies can access the apprenticeship levy, and smaller companies with an annual pay bill of less than £3million only pay 5% of their apprenticeship training. The Government pays the rest.

Businesses that pay the levy can access the funds online and are encouraged to fund apprenticeship training within 24 months.

Initially, the period was 18 months but was extended to give employers greater flexibility. If there are unspent funds at the end of the 24 months, they will expire. The expired funds will pay for existing apprenticeships, including new equipment. Companies can also transfer up to 25% of their levy to another employer.

As long as the levy is paid, new funds are deposited into the employer’s account every month, to fund apprenticeships lasting longer than 24 months.

The oldest funds in the account are used first to prevent them from expiring. Huge companies and public sector organisations such as the NHS, Royal Mail, the British Armed Forces, Lloyds Banking Group and Channel 4 use the apprenticeship levy to fund diverse apprenticeships.

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