The Apprenticeship Levy – Explained

What Is The Apprenticeship Levy?

In 2014, Prime Minister David Cameron made a pledge that the Conservative government would make changes to welfare allowance with a goal of funding three million new apprenticeships in the UK by the year 2020. As part of the government’s ongoing commitment to tackling youth unemployment, Chancellor George Osborne made a surprise announcement in his 2015 Summer Budget, declaring that a new Apprenticeship Levy would come into the practice to help fund apprenticeship training in the UK.

When Is It Scheduled To Be Introduced?

The new apprenticeship levy is due to begin in April 2017, more than 18 months after it was explained by Chancellor George Osborne in his 2015 Autumn Statement.

What Type Of Businesses Will Be Eligible To Pay The Levy

Businesses are given an allowance of £15,000. This effectively means that only companies with an annual payroll of £3 Million or more will be eligible to pay the new Apprenticeship Levy. Any business with a lower figure for their payroll will not be eligible, as the amount owed in tax would fall below the £15,000 allowance.

How Much Is The Levy?

Eligible businesses will contribute a sum of 0.5% of their total annual payroll towards the levy.

How Does The Apprenticeship Levy Affect Large Businesses?

Large companies in the UK that have a payroll of over £3 Million will be eligible to pay the levy. Whilst the ‘pot’ of money accumulated from the levy will help fund apprenticeships, there is also a mindset that it will encourage large organisations to employ larger quantities of apprentices with a view to making back some of the funds that they have contributed.

How Does The Apprenticeship Levy Affect Small and Medium-sized Businesses (SMEs)?

Businesses that have an annual wage bill of less than £3 Million actually make up approximately 98% of businesses in the UK, and these companies and organisations will be exempt from paying the new levy. Some larger SMEs will, however, be eligible for the levy, as based on an average salary a company of around 100-150 employees could effectively have an annual payroll of £3 Million or more.

It is believed that a new model is currently being looked at in terms of how smaller businesses who are not eligible to pay the levy can have access to the government’s funding in order to provide apprenticeship schemes.

What Has The Public’s Response To The Levy Been?

There has been quite a bit of speculation and hypothesising since the announcement of the Apprenticeship Levy in the latter part of 2015. Many are in favour of apprenticeship schemes as an active, hands-on approach to combating youth unemployment whilst developing a young, experienced workforce across a wide array of business types in both the private and public sectors.

There are still, however, many questions that remain unanswered, and the lack of concrete information available to SMEs means that there is still a long way to go until the Levy is introduced in a year’s time.

Some organisations will no doubt have organised pilot apprenticeship schemes for the 2016-17 financial year in order to get ahead of the Apprenticeship Levy by gaining access to government funding for their workforce.