The Apprenticeship Levy is a government initiative to encourage businesses to invest in training new apprentices, by ring fencing money for this purpose.
Since April 2017, organisations with employees and an annual wage bill of more than £3 million have been required to pay an additional 0.5% percentage to HMRC as their Apprenticeship Levy, to be paid monthly. Every levy-paying employer has an annual levy allowance of £15,000, which means that the first £15,000 per year of their apprenticeship training costs is already offset by this. The government also tops up levy funds by 10%. Any additional costs are then designed to be covered by levy payments.
Our Apprenticeship Levy calculator provides a quick and straightforward way for organisations to calculate how much they should be paying in Apprenticeship Levy, which is useful when planning overall apprentice costs.
Apprenticeship Levy Calculator
Your apprenticeship levy payment is 0.5% of your annual wage bill (of more than £3 million) minus the government’s allowance of £15K.
The above calculator is for illustrative purposes only. The actual amount that you are due to pay in Apprenticeship Levy may vary. It’s important to note that the annual total Apprenticeship Levy due, along with the allowance, needs to be divided by 12 and paid monthly during every tax year.
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How much does an apprenticeship cost an employer?
There are lots of variables with apprenticeships which can affect how much it costs an organisation to hire an apprentice.
For those that pay the Apprenticeship Levy, there are already these funds ring fenced to cover the apprenticeship training costs, but these are not the only costs to take into account when bringing on an apprentice. You’ll also need to factor in:
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The apprentice’s wages (which can vary, depending on their age, the duration of the apprenticeship and more)
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Employer’s National Insurance contributions (if applicable, which will depend on the apprentice’s age and wages)
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Any applicable government incentives e.g. a £1,000 incentive paid to the organisation if the apprentice hired is aged 16-18 years or under 25 years if they have an ECHP or are a local authority care leaver.
For organisations that do not pay the Apprenticeship Levy, they will also need to factor in the 5% of training costs that they need to cover (the government pays the other 95%). This can sometimes be mitigated if the employer is able to transfer unused Apprenticeship Levy funds from another organisation that isn’t using it.
Find out more about apprenticeship funding.
Example Apprenticeship Levy calculation
To help illustrate how Apprenticeship Levy calculations work, we’ve broken down an example simplistically.
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This employer has an annual wage bill of £5 million.
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Their levy sum will be £25,000 annually (0.5% of 6,000,000).
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The levy allowance is applied, which leaves a bill of £10,000 annually (£25,000 - £15,000 levy allowance).
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The employer needs to pay HMRC a sum of £833.33 each month for their Apprenticeship Levy (£10,000 ÷ 12 months).
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The government will apply a 10% top up for payments made, adding another £1,000 annually to the funds available to the employer (10% of £10,000).
It’s important to remember that organisations have 24 months to use apprenticeship funding from their Levy account or transfer a portion of it to non-levy paying businesses.
What your Apprentice Levy calculator result means
The calculator result will outline your overall apprenticeship levy bill, once the levy allowance has been applied. This gives you the amount you’ll need to pay, to help you plan your future apprenticeship strategy and ensure that the funds are put to the best possible use for your organisation and skills gaps.
How PfP Thrive can help with your apprenticeship needs
As specialist training providers, PfP Thrive will work with employers to create a learning plan that is tailored to your specific organisation’s needs to ensure that by the time your apprentice completes their programme, they will have all of the necessary skills to not only fulfil their role competently but do so in a way that aligns with your values, ethos, and business.
Apprentices are a big part of the future of your organisation, so it’s important that they have the technical and soft skills needed at the end of their apprenticeship to thrive and grow with your business for years to come.
Our training expertise aims to maximise the impact of every apprentice on your organisation, helping to set them up for success and add value to your business, delivering wins all round.
Find out more about PfP Thrive’s apprenticeship training.