From April 2017 all businesses with a payroll over £3m will be obliged to pay a significant new tax, called The Apprenticeship Levy. It may come as a surprise to many businesses that there will be no distinction made between those who employ apprentices and those who donít. Since this will be a significant amount, it is important that businesses understand how the levy works, how it can benefit them and in what ways it is possible to earn this money back.

Why is the levy coming into place?

The UK Government has identified a skills gap which they feel is significant in comparison to our counterparts in the EU and other developed economies to which they feel apprentices can best address. As a result of this, the Government have committed to introducing 3 million new apprentices by 2020 which will be funded by The Apprenticeship Levy. They also wish to ensure that as part of this, apprentices receive recognised training at the end of their apprenticeships as standard. This will gradually be made compulsory for all new apprenticeships.

What will you pay?

All businesses paying over £3m in annual salary will have to pay 0.5% of their annual salary bill with an initial £15,000 offset applied. This new taxation will start being collected through PAYE from 1 May 2017.Practically, this means, for example ,that an employer of 250 employees with a payroll of £5m would pay £10,000 in annual levy payment after the £15,000 offset has been deducted.

What are the benefits?

The amount paid will be put into a digital account which employers can use in the form of digital vouchers to pay for training and assessments for apprentices. It should be noted that the levy cannot be used to help pay an apprentices salary. All employers who pay the levy will receive a 10% top-up from the Government to their monthly contributions. Connected companies can also pool their funds into a single levy. It is estimated that a business employing 1 new apprentice per month for 12 months at national living wage could save approximately £6,700 in apprenticeship training.

Smaller companies who do not have to pay the levy can still access the scheme. If they pay 10% of the costs of approved apprenticeship training the Government will co-invest the remaining 90%.Similarly,any larger employer who wishes to spend more than the amount they pay in the Apprenticeship Levy can benefit from such co-invested Government funding.

What happens to my existing apprentices?

Any current and new apprenticeships will be placed in a funding band ( see further details at

How are you going to make the most of it?

This is likely to change the landscape of entry level roles, hiring trends and long term career patterns as we currently know it. School leavers will have more opportunities than ever before and will quickly become an attractive employment alternative. If your business will be paying into the levy from April 2017 it makes sense to consider your hiring opportunities for apprentices. As the only employees within your organisation who can be trained for free via the levy, your tax payments are best spent on your own hires.

As of 2017, apprentices will become an in-demand candidate pool. Let us help you become the employer of choice with advice on attracting the best candidates, how to engage candidates within this recruitment process, and how to design a long-term development strategy to ensure new apprentices can really flourish within your business.

Elizabeth Hawkins, Client Services Manager


You can work your levy payment out using the levy calculator via :

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