---
title: Understanding the Apprenticeship Levy - activpayroll
description: The government is introducing a tax designed to stimulate the UK's apprenticeship schemes - what do employers need to know?
---

[News and Insights ](https://www.activpayroll.com/news-articles)

# [Understanding the Apprenticeship Levy - activpayroll](https://www.activpayroll.com/news-articles/understanding-the-apprenticeship-levy)

 Written by [activpayroll](https://www.activpayroll.com/news-articles/author/activpayroll) | Nov 8, 2016 12:00:00 AM

 The government is introducing a tax designed to stimulate the UK's apprenticeship schemes - what do employers need to know?

To meet the UK government's goal of training 3 million new apprentices by 2020, the Apprenticeship Levy will be introduced in April 2017. Although the levy applies to thousands of businesses, [recent research](http://www.bna.com/apprenticeship-levy-mean-b57982079000/) suggests 39% of employers do not understand what the levy is, or does. To ensure no unpleasant payroll surprises next year, it's worth becoming familiar with the details...

### What is the Apprenticeship Levy?

Essentially, the Apprenticeship Levy is a tax designed to change the way the UK's apprenticeship schemes are funded. The tax will be charged at a rate of 0.5% of total pay bill (the total subject to Class 1 [National Insurance Contributions](https://www.gov.uk/national-insurance/national-insurance-classes)), and be payable by businesses with current payrolls of £3 million or more - including nonprofits and charities. Like National Insurance contributions, levy payments will be made to HMRC through the PAYE system.

### Levy Allowance

To offset the levy, the government is introducing an annual £15,000 allowance which may be subtracted from the total amount your business owes. The allowance is administered on a monthly basis, and is cumulative - any unused allowance can be carried over to the next payroll month.

### Digital Apprenticeship Service

The tax will be fed back to employers through a special [digital apprenticeship service](https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/526628/Inform_107_May_2016.pdf). Levy-paying employers (in England) will gain access to their own account, which will offer a range of apprenticeship tools:

- The digital service will host a range of government approved, Ofsted-rated training providers.
- Employers can use their account to identify training providers, advertise vacancies and select apprenticeship candidates.
- Funds can be used to train, assess and certify apprentices - but will be capped depending on level and type of apprenticeship. Funds may not be used to cover apprentice wages, or supervision costs.
- The government will apply a 10% top-up on funds accessed through the scheme.
- Funds will be available as vouchers with a 24 month expiry date.
- While initially available only to levy-paying businesses, the digital service will eventually expand to all UK businesses.
- Similar services will be introduced in Scotland, Wales and Northern Ireland.

The Apprenticeship Levy is targeted at bigger businesses but plenty of [medium-sized businesses](http://www.britishchambers.org.uk/press-office/press-releases/bcc-businesses-in-the-dark-on-apprenticeship-levy.html) will also be affected. Make sure you understand your tax obligations to the Apprenticeship Levy, before it comes into play, by exploring [HMRC's guidance](https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work) on the topic.

[View full post](https://www.activpayroll.com/news-articles/understanding-the-apprenticeship-levy)

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