What is the Apprenticeship Levy Fund?

What is the Apprenticeship Levy Fund?

How the levy fund works, eligibility, benefits, and how it is shaping skills development.

What Is the Apprenticeship Levy?

The apprenticeship levy stands as a cornerstone initiative that has been making waves in the business world as it’s designed to bridge the skills gap and foster a culture of continuous learning. In this guide, we will delve into all the details of the apprenticeship levy including how it works, eligibility, benefits, and how it is shaping skills development.

How Does the Apprenticeship Levy Work?

The apprenticeship levy was introduced by the UK government to help people improve their skills for work. Big companies with an annual payroll of more than £3 million pay a small percentage (currently 0.5%) of their yearly payroll, offset by a £15,000 government apprenticeship levy allowance, into a special fund that is used to pay for training apprentices. It’s essentially investing in your staff to learn and grow.

Businesses can access the money they’ve put in to train new and existing employees through an online service called the Digital Apprenticeship Service (DAS). The DAS is an online portal where employers can manage their apprenticeship training and it allows employers to select apprenticeship standards or frameworks, choose training providers, and pay for apprenticeship training. This way, both the company and the workers can benefit from gaining new skills and improving job performance.

Any funds are topped up each month with a 10% government contribution. They also expire after 24 months, so it’s important to use your levy as soon as possible.

Who’s Eligible?

The levy applies to any business operating in the UK whose annual payroll is higher than £3 million. This threshold includes various elements of the bill, like wages, bonuses, and pensions, but excludes other payments like benefits in kind and statutory sick pay.

Businesses who fall below this threshold aren’t eligible for the apprenticeship levy, but can still access government support for apprenticeship training.

Benefits of the Apprenticeship Levy

The apprenticeship levy brings a whole host of benefits for both employers and the economy. These include:

Workforce Development: The apprenticeship levy encourages employers to invest in developing the skills of their workforce, leading to a more skilled and adaptable workforce that can better respond to industry changes.

Talent: By offering apprenticeships, businesses can nurture a pipeline of talent from within which reduces recruitment costs and increases employee retention.

Increased Productivity: Apprenticeship programs drive increased productivity as employees gain new skills and knowledge that directly contribute to their job roles.

Boosts the Economy: With a skilled workforce, the economy becomes more competitive on a global scale, attracting investment and promoting sustainable growth.

How it Impacts Skills Development

The impact of apprenticeship levy on skills development can’t be overstated. This initiative drives a culture of learning and development which creates a mindset of continuous improvement within businesses. Apprenticeship programs offer a structured pathway for people to build essential skills from technical expertise specific to the job role they are in to soft skills like teamwork and problem-solving. This improves employee satisfaction and engagement which leads to a positive work environment.  

Apprenticeship Funding for Employers

As an employer, it can be exciting yet complex to navigate apprenticeship funding in your business. However, the government offers some incentives and options to make it a little easier.

Government Incentives

The government recognises the importance of investing in young talent, and so offers incentives for employees who choose to take on apprentices.

     • If you hire an apprentice aged 16 to 18, you’ll receive a £1000 government incentive to help offset the costs associated with training younger workers.

     • If you hire an apprentice aged between 19 and 24 who has previously been in care, you can access an additional £1000 government payment. This incentive aims to provide valuable opportunities for young people who may need extra support.

     • Small businesses with less than 50 employees can train apprentices aged 19 to 24 who have left care without any incurring training costs. This is a great opportunity for small businesses to contribute to the growth of young people without financial obstacles.

Co-Investment and Levy Connected Companies

Co-investment provides a flexible option for companies to engage in apprenticeship programs.

     • Non-levy paying employers can access apprenticeship courses by contributing just 5% of the course costs whilst the government covers the remaining 95%.

     • If a company paying the apprenticeship levy runs out of their funds, they can opt for the co-investment route.

     • Non-levy paying employers can reserve up to 10 apprenticeship starts per year.

Government Contribution for Levy Payers

For companies paying the apprenticeship levy, there's an extra perk. The government boosts all levy payments by 10%. This means that for every £100 you put into your levy fund, your digital account will reflect £110, maximising your available resources for training and development.

Maximising Your Levy Investment

Investing in apprenticeships through the levy isn't just about meeting a financial obligation – it's about nurturing your workforce and reaping long-term rewards. To make the most of your levy investment, consider the following strategies.

• Tailor apprenticeships to meet your business goals for skill development, productivity, and innovation.

• Choose apprenticeships that align with your industry and address specific skill gaps.

• Build strong partnerships with training providers to ensure quality education for apprentices.

• Allocate funds wisely, considering wages, materials, and associated costs.

• Encourage diverse applicants to enrich your talent pool and bring varied perspectives.

• Offer mentorship, clear communication, and feedback for a positive learning experience.

• Establish performance indicators to assess skills gained and overall program impact.

• Extend apprenticeships to current employees for improved capabilities and job satisfaction.

• Look into grants and external funding to supplement your levy investment.

• Adapt apprenticeship strategies to evolving industry trends and business needs.

By using these strategies, your apprenticeship levy investment can drive growth, skill development, and lasting success for your business.

How to Calculate the Apprenticeship Levy

If you’re interested in introducing apprenticeships to your business, here’s how you can work out the apprenticeship levy. Your apprenticeship levy payment is 0.5% of your annual wage bill minus the government’s allowance of £15,000. This is what will be added to your digital account plus the 10% top up every month from the government.

The Formula

You can calculate your levy payment amount with the following formula:


If your company has an annual wage bill of less than £3 million, you won’t have to pay the levy as the levy allowance will be less than the £15,000 offset.


How do I measure the success of my apprenticeship programs?

Think about performance indicators to asses skills gained, productivity, and overall improvement. It’s important to regularly evaluate the success to impact future decisions.

When is the apprenticeship levy payable?

The apprenticeship levy is payable every month and is calculated as 0.5% of your annual pay bill. It is collected automatically by HMRC.

What is a levy transfer?

A levy transfer is essentially when a levy-paying employer agrees to transfer a portion of their levy funds to another employer to use to train an apprentice.

What if my business goals change? Can I adapt my apprenticeship strategy?

Yes, it's important to adapt your strategy as your business evolves. The flexibility of the levy allows you to tailor your apprenticeship initiatives to changing needs.

Can I use the levy funds to pay apprentice wages?

Yes, you can use the levy funds to pay for apprentice wages. The funds can cover a range of costs associated with approved apprenticeship training and assessment, including wages, training materials, and any relevant support services.

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