Levy paying employers

From 1st May 2017, the way the government funded apprenticeships changed. As a result, some employers are required to contribute to a new apprenticeships levy and there are changes to the funding for apprenticeship training for all employers.

Does the apprenticeship levy apply to my business?

You will pay the apprenticeship levy if you are an employer with a pay bill of more than £3 million each year. For the purposes of the levy, an ’employer’ is someone who is a secondary contributor, with liability to pay Class 1 Secondary National Insurance Contributions (NICs) for their employees.

How much will my business have to pay?

The levy will be charged at a rate of 0.5% of your annual pay bill. You will have a levy allowance of £15,000 per year to offset against the levy you must pay. This means you will only pay the levy if your pay bill exceeds £3 million in a given year.

The levy allowance will operate on a monthly bases and will accumulate throughout the year. This means you will have an allowance of £1,250 a month. Any unused allowance will be carried from one month to the next. For example, if your levy liability in month 1 is £1,000 you will not pay the levy and your allowance in month 2 will be £1,500.

If you have some unused allowance in a month, but paid the levy previously in the tax year, you can receive a credit which you can use to offset against you other Pay As You Earn (PAYE) liabilities. The credit will also reduce the amount of levy paid.

This example uses an employer with an annual pay bill of £5,000,000:

Levy sum: 0.5% x £5,000,000 = £25,000

Subtracting levy allowance: £25,000 – £15,000 = £10,000 annual levy payment.

How will the fee be paid?

You will calculate, report and pay your levy to HMRC, through the Pay As You Earn (PAYE) process alongside tax and National Insurance Contributions (NICs). If you have calculated that you will pay the apprenticeship levy, you will need to declare this and include it in your usual PAYE payment to HMRC by the 19th (or 22nd if you report electronically) of the following month.

How does a business access their funds?

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