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Apprenticeship Reforms and the Apprenticeship Levy

On 6 April 2017 significant changes to the management and funding of apprenticeships transformed
the way businesses engage with staff development.

What are the changes?

Most importantly, businesses will have greater influence over the content of apprenticeship training and
increased buying power when selecting a training partner. Through their part in identifying and agreeing
new apprenticeship standards, employers representing a broad range of business sectors have designed
training that’s modern, relevant, and fit-for-purpose to aid business growth.

The second major change relates to the way apprenticeships are funded. Businesses with an annual wage
bill greater than £3 million will pay an apprenticeship levy.

Thirdly, businesses will buy and manage their apprenticeships through the Digital Apprenticeship Service
– an online portal to inform buying decisions, purchase training, and manage relationships with training

What is the Apprenticeship Levy?

From April 2017 all employers with an annual wage bill greater than £3 million pay a 0.5% tax on payroll.
The Levy will be collected every month through the PAYE system alongside income tax and national
insurance contributions.

The government hope the changes will help to bridge the skills gap by encouraging more businesses to
invest in future talent. 

Eventually the Levy will replace all taxpayer funding for apprenticeships for companies of all sizes.

What will employers get back?

Businesses in England will be able to reclaim their levy contributions as digital vouchers to pay for
training apprentices. Levy payers will also receive a 10% top-up from the government to their total
monthly contributions.

Unspent funds in an employer’s digital account will expire after 24 months.

What about smaller business that do not have to pay the Levy?

The Government has committed to support employers with a smaller paybill (of less than £3 million).
Employers who do not pay the Apprenticeship Levy contribute 10% of the cost of their apprenticeship
training. The government pay the remaining 90%.

What can Levy funds pay for?

Funds can pay for apprenticeship training and assessment.

Businesses cannot use Levy funds for wages, travel or subsidiary costs, managerial costs, work
placements, traineeships or the costs of setting up an apprenticeship programme.

Will there be any extra financial support?

Businesses who take on an apprentice aged 16-18 will receive an incentive to help meet the extra costs
of employing them.

The same additional payment will be made to businesses who take on disadvantaged apprentices aged
19-24 – for example those with an education and healthcare plan provided by the local authority or those
who have been in local authority care.