Apprenticeship Levy: How Larger Employers Can Use It Well

Apprenticeship Levy: How Larger Employers Can Use It Well

What is the Apprenticeship Levy?

The Apprenticeship Levy is a UK-wide charge introduced in April 2017 to fund apprenticeships.

It applies to all employers with a pay bill (gross wages, salaries, bonuses and other earnings subject to Class 1 secondary National Insurance contributions) of £3 million or more per tax year.

The levy is collected by HM Revenue & Customs (HMRC) through the Pay As You Earn (PAYE) system and is a discrete line on the Employer Payment Summary that must be reported in real time.

For larger organisations the levy is not an optional extra – it is a legal obligation that creates a ring‑fenced fund for apprenticeship training and assessment.

Understanding how the levy works, how to calculate it and how to spend the funds efficiently can turn a cost into a strategic investment in skills.

Who Has to Pay and How Is the Levy Calculated?

If your organisation’s total pay bill exceeds £3 million in a tax year you are a levy‑paying employer.

The levy is charged at a rate of 0.5 % of the pay bill, but you receive an annual allowance of £15 000 that reduces the amount you actually pay.

In practice the levy due is: Levy = (Pay bill – £15 000) × 0.5 % For example, an employer with a £5 million annual pay bill will pay:

(£5 000 000 – £15 000) × 0.005 = £24 925 per year.

The levy is collected monthly via the PAYE scheme.

You must report the levy amount on your Full Payment Submission (FPS) for each pay period.

The funds are then credited to your Digital Apprenticeship Service (DAS) account, usually within a few weeks of the payment run.

The Digital Apprenticeship Service (DAS) Account

All levy‑paying employers must register on the Digital Apprenticeship Service (DAS) – the online portal run by the Education and Skills Funding Agency (ESFA).

The DAS is where you view your levy balance, create apprenticeship commitments, authorise training providers and manage payments.

Key steps to set up your account:

• Log in to the GOV.UK apprenticeship service using your Government Gateway credentials.
• Link your PAYE scheme(s) to the account – each PAYE scheme that incurs levy will show a levy estimate.
• Verify the declared pay bill figure.

  If the figure differs from your actual payroll, you can correct it in the next reporting period.

• Designate an apprenticeship co‑ordinator (often a senior HR or finance manager) who will manage commitments and authorise payments.

Once your account is active you can start allocating levy funds to apprenticeship programmes.

Funding Bands and How Much You Can Spend

Each apprenticeship standard (the occupational profile that defines the knowledge, skills and behaviours an apprentice must achieve) is assigned to one of 15 funding bands.

The band determines the maximum amount of levy funding that can be used for that apprenticeship.

The bands range from £1 500 to £27 000, with most intermediate‑level standards sitting in the £3 000–£6 000 range.