In December HMRC released guidance on how to pay the new Apprenticeship Levy, a key part of the Apprenticeship Reforms which we explained in our blog: What the final policy announcements mean for employers. Paying the levy, which becomes a legal requirement from 6th April this year, will be compulsory for employers with a salary bill of over £3 million and those connected to an organisation for Employment Allowance with a total pay bill of this amount.

It’s worth reading the full guidance to paying the Apprenticeship Levy on the HMRC website but here’s a quick summary of the main points, to get you started:

Main points in the Levy guidance

  1. Your pay bill includes all employee payments subject to Class 1 secondary National Insurance Contributions (NICs). You need to include any payments to: employees earning less than the Lower Earnings Limit and the Secondary Threshold; apprentices aged under 25 and employees under the age of 21.

  2. The levy will be reduced by £15,000 in the form of an allowance and the government will pay an extra 10% of your Levy payment into your account each month.

  3. Employers connected to other companies and charities can choose how the £15,000 allowance is allocated between your PAYE schemes or your connected companies/charities.

  4. The first time you pay the levy, you must report on how you’ve allocated the allowance and stick to this for the rest of the tax year.

  5. For schools, the allowance depends on the type of school; for maintained schools it’s the Local Authority and for voluntary-aided and foundation schools and academies, the governing body is the employer.  Multi Academy Trusts receive a single allowance of £15,000.

  6. The Apprenticeship Levy will be 0.5% of your annual pay bill; for help in working out the figure you’ll pay, you can use the HMRC’s Basic PAYE Tools.

  7. You’ll be required to tell HMRC every month the amount of the Levy you owe, using your Employer Payment Summary (EPS).

  8. For employers who run a modified PAYE scheme, use a best estimate of all the earnings which are subject to Class 1 secondary NICs, to help you work out if you are liable to pay the Levy.

  9. The Apprenticeship Levy needs to be paid through the PAYE process, using the same methods which you’d use to pay Income Tax or NICs; you’ll receive a PAYE credit if you overpay and payments are counted as a deductible expense for the purposes of Corporation Tax.

  10. If you contribute to an industry-wide training levy arrangement, you’ll still need to pay the Apprenticeship Levy as well.

Steps employers need to take

There are steps between now and May 2017 that you may need to take; click on ‘What you need to do now’ (below), to access our handy step-by-step guide.


What you need to do nowHow we can help




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