Apprenticeship Levy

The Apprenticeship Levy is a UK Government employment tax that came into effect on 6 April 2017. It will be collected across the whole of the UK. All employers (public, private and third sector) with a pay bill of more than £3 million each year will pay the levy.

The levy is set at 0.5% of an employer’s annual wage bill and each employer will receive an allowance of £15,000 per year to offset against the levy. This means that although the levy applies to all employers, only employers with a wage bill over £3 million will pay it.

For example:

Employer A has 250 employees, each with a gross salary of £20,000. They would pay:

• Pay bill: 250 x £20,000 = £5,000,000


• Levy sum: 0.5% x £5,000,000 = £25,000


• Allowance: £25,000 - £15,000 = £10,000 annual levy payment

Employer B has 100 employees, each with a gross salary of £20,000. They would pay:

• Pay bill: 100 x £20,000 = £2,000,000


• Levy sum: 0.5% x £2,000,000 = £10,000


• Allowance: £10,000 - £15,000 = £0 annual levy payment

Employers who operate multiple payrolls will only be able to claim one allowance.

You can use the Skills Funding Agency's indicative online tool for employers to estimate your levy contribution, begin your training requirements, and estimate your financial spending.

You can find further details on the calculation and payment of the apprenticeship levy on Gov.uk.

Each month, HM Revenue and Customs (HMRC) will collect the levy through Pay As You Earn (PAYE),  payable alongside income tax and National Insurance. HM Treasury will allocate funding to the Scottish Government through the block grant.

For further details on the calculation and payment of the apprenticeship levy, read HMRC draft legislation.

The Scottish Government's response to the UK Government Apprenticeship Levy sets out how they will use the £221m of levy funding over 2017/18 to support skills, training and employment in Scotland. This includes the delivery of 30,000 Modern Apprenticeship starts per year by 2020, and the establishment of a Workforce Development Fund to help employers up-skill and re-skill their workforce.

The Flexible Workforce Development Fund (FWDF) provides employers with an opportunity to up-skill and re-skill an existing workforce.  It is available to organisations across the private, public and third sectors that are subject to the UK Government’s Apprenticeship Levy.  

Eligible employers can access the fund, which is administered by the Scottish Funding Council on behalf of the Scottish Government, by getting in touch with their local college.

What do you need to know about the FWDF?

• The FWDF is available to all levy paying employers in Scotland across the private, public and third sectors


• Each levy paying employer can access up to a maximum of £10,000 in 2017/18


• The fund can be used as part-contribution towards training of a higher cost


• Employers may submit only one application to the fund within the application period


• The fund is in addition to apprenticeship support which all employers are eligible to access in Scotland. Read all about Foundation, Modern and Graduate Level Apprenticeship programmes. 


• The fund will not support provision of qualifications or training required by legislation


• Scottish Government have confirmed there will be a second year of the fund in 2018/19 to be launched before the start of the academic year


• The deadline for Levy paying employers to make an application is now the end of June 2018
  

   

  
  

Yes. All employers with a wage bill greater than £3million will pay the levy. Employers could review their skills needs and consider how their current training could be delivered through an approved apprenticeship to maximise their return on the levy.

Yes. All employers will still be able to access funding for approved apprenticeships. We recognise that apprenticeships are an essential way for SMEs to develop their employees and contribute to growth.

No. Scotland and England have different administrative arrangements for funding apprenticeships.

In England, funding for apprenticeship training will be administered through a digital apprenticeship system for levy paying employers. There are no plans to adopt this system in Scotland, and apprenticeship funding will continue to be administered by SDS through contracted training providers and direct employer contracts.

Yes, if they have a pay bill greater than £3million, as the apprenticeship levy applies to all employers.

There are two existing industry training boards – the Construction Industry Training Board (CITB) and the Engineering Construction Industry Training Board (ECITB) – which operate their own levies.

Both bodies are in consultation with their member companies on how the new apprenticeship levy will interact with their current levy mechanisms. Both will offer more information when it is available.

SDS will work with employers, including industry bodies, to provide support as administrative arrangements are developed.

We’ll keep updating this page with the latest information for employers on the apprenticeship levy.

Skills Development Scotland (SDS) has established an employer-led Scottish Apprenticeship Advisory Board  (SAAB) to strengthen employer contribution to the development of apprenticeships in Scotland, ensuring they are aligned with industry and economic need, Fair Work and job opportunities.

Both SDS and SAAB continue to engage with the Scottish Government, employers and partners ahead of the levy's introduction.

As part of this, the the Minister for Employability and Training, Jamie Hepburn, has emphasised that the Workforce Development Fund – aimed at helping employers up-skill and re-skill their workforce - will be developed through the Scottish Apprenticeship Advisory Board and that a working group will be set up in due course. Read further details in our news story.

Led by employers and representatives from industry bodies across a range of sectors, the Scottish Apprenticeship Advisory Board (SAAB) will provide employer leadership and contribution to the development of apprenticeships in Scotland; ensuring they are aligned with industry and economic need, Fair Work and job opportunities. The Board consists of four groups – a Group Board, Employer Engagement Group, Employer Equalities Group and Frameworks and Standards Group.

The Board will also contribute to the Scottish Government’s consultation process on the Apprenticeship Levy and also actively encourage others with a shared interest in apprenticeships to participate.

SDS will work with the Board to ensure a demand-led, responsive and adaptive work-based learning system for employers and the Scottish economy.

The UK Government announced plans for a UK-wide apprenticeship levy on employer payroll bills in 2015.

The levy is aimed at funding increased uptake of apprenticeships.
Legislation will be introduced in 2016 and the levy itself will be payable from April 2017 onwards.

To understand the difference in apprenticeship policy across the four home nations you can read the SQA’s A Guide to Apprenticeships in the UK guide and view their interactive table.