The Apprenticeship Levy Explained

Later on this year, large organisations will be subject an Apprenticeship Levy as the government changes legislation surrounding apprenticeships. Although it will mainly be large employers that are affected by the levy, there may well be some effect on small businesses too.

So what do you need to know? Here we explain what the apprenticeship levy is, when it comes into effect and who will be affected by it.

What is the Apprenticeship Levy?

The Apprenticeship Levy is a charge payable to HMRC via PAYE returns which will be applied to large employers in both the public and private sectors. Once the new legislation comes into force, employers that pay into the levy can also use it to fund apprentice training within their businesses.

The idea behind the levy is that it will encourage employers to invest in apprenticeship schemes, as well as raise additional funds to help improve the quality and quantity of apprenticeships.

Who will be Subject to the Levy?

The threshold for the levy will depend on the size of a business' payroll. Those businesses with a wage bill of over £3 million will be required to pay the charge. Therefore, as the levy will only apply to 2% of all employers, only larger SMEs will be affected.

If a company is over the payroll threshold, it will have to pay 0.5% of its payroll into the levy. With that, every employer will receive an allowance of £15,000 to offset against what they owe. This is why the levy is only being charged to those companies with a payroll larger than £3 million, as it means the £15,000 allowance could potentially offset the entire amount owed.

When does the Apprenticeship Levy come into force?

The levy comes into effect on 1st April 2017, and is payable via PAYE. There has been a mixed response from businesses towards the levy. Some are worried that larger businesses will have to fund extra apprenticeships over their £15,000 allowance themselves. Others are welcoming the levy as a way to improve the quality of apprenticeship schemes.

If you're worried about the effect of the apprenticeship levy on your business, why not take some advice from professionals? Your local bookkeepers will be able to help you navigate through the new legislation.

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