What actually is the new Apprenticeship Levy?
As the Government is committed to increasing the quality and quantity of apprentices, they have introduced the new Apprenticeship Levy. Announced in the 2015 Summer Budget, they are aiming to train three million apprentices by 2020. Hopefully the Apprenticeship Levy will help! It’s aimed at large businesses.
It is basically a new, obligatory tax payable by companies who have an annual payroll amount of £3 million or more. At the moment it will only affect less than two percent of employers in the UK, but it’s still worth knowing what it it is if your business grows to that size.
The Apprenticeship Levy will encourage employers to invest in apprenticeships. The size of the investment will depend on the size of the company.
How does it work?
An employer who pays out £3m+ to its employees each year (£250,000 per month) will have to pay 0.5% of the amount above £250,000 in one month. For example, if you paid out £250,010 one month, you’d need to pay 0.5% of the extra £10.
The Government is also putting in place a ‘levy allowance’ of £15,000 per year. This means that the total amount a company is required to pay into the levy is lessened by £15,000 each year.
If a company is connected to another company or charity, they will only have one £15,000 allowance to share between them.
What happens then?
Once it’s being paid, funding will be accessed through the company’s Digital Apprenticeship Service account. This is where they can post apprenticeship jobs and select providers approved by the Government. At the moment, this account is only available to companies paying into the levy, but the Government should give access to all employers by 2020.
If they commit to training apprentices, a company will get their money back that they’ve invested in the levy and more. The Government will top-up a company’s levy by 10% to spend on training apprentices. So, for every £1 put in the levy, an employer can draw £1.10. As another incentive for companies to use the levy, any funds that remain unused will expire in two years. Use it or lose it!
So, the aim is to train three million great apprentices by 2020.
Paycircle and the Apprenticeship Levy
When you’re using Paycircle, you don’t need to worry about whether or not the Apprenticeship Levy has been applied – this all happens automatically. As soon as you reach the £250,000 per month threshold, the levy will be applied and deducted as necessary.
You’ll be able to see on your payroll reports the amount that has been paid into the levy. If you are under the threshold and so not paying into it, there won’t be anything showing on your reports. So don’t worry, it’s still tracking to see when/if you go over the threshold so it can come into effect.
If you’re close to the threshold but maybe bonus’ and commission pushes you over £250,000, you’ll have to contribute. With Paycircle, we’ll send you a notification when you reach £150,000 a month informing you of the Apprenticeship Levy and what it’s all about. So don’t panic, you’ll have ample warning!