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Apprenticeship Levy

For any information email us at support@ior.org or call 0871 288 2108

What is the apprenticeship levy?

The apprenticeship levy is part of the Government’s plan to increase apprenticeships and is a new tax which aims to fund 3 million new apprenticeships in England by 2020. The Government’s aim is that the new levy should help to improve both the quantity and the quality of apprenticeships and will come in to effect in April 2017.


Who will pay the levy?

The apprenticeship levy only applies to employers with an annual pay bill of more than £3 million, they will start paying the levy in May 2017.

Each month, you must:

  • let HMRC know whether you need to pay the apprenticeship levy
  • include the levy you need to pay in your usual PAYE payment to HMRC – you should do this by 19 (or 22 if you report electronically) of the following month

Any apprenticeship levy payment to HMRC will be allowable for Corporation Tax.


How do I calculate how much levy I pay?

To calculate how much levy, you will pay, follow these steps:

1) Work out what your total pay bill is.

Your pay bill is made up of the total amount of your employees’ earnings that are subject to Class 1 National Insurance contributions. Employees’ earnings include any money they make from employment, such as:

  • wages
  • bonuses
  • commissions
  • pension contributions

We will not charge the levy on other payments to employees, such as benefits in kind.

2) Work out what 0.5% of your total pay bill is.

3) Subtract the £15,000 allowance.

Example
An employer with an annual pay bill of £5,000,000 will need to spend £10,000 on the levy:

  • Levy sum: 0.5% x £5,000,000 = £25,000
  • Subtracting levy allowance: £25,000 - £15,000 = £10,000 annual levy payment.