The apprenticeship levy was introduced from 6 April 2017 and is payable by employers who have an annual pay bill of more than £3 million. An employer’s annual pay bill comprises all payments to employees that are subject to Class 1 National Insurance contributions. The levy is charged at 0.5% of the annual pay bill.
HMRC have recently updated their guide to the apprenticeship levy. The guide is available on the Gov.uk website.
Employers have an annual allowance of £15,000 to set against apprenticeship levy payments, meaning that the levy is only payable by those with a pay bill of more than £3 million (on £3 million, at 0.5%, the levy is £15,000 – exactly offset by the allowance).
In calculating the annual pay bill, employers must remember to include all employees’ earnings below the lower earnings limit and secondary threshold, employees under the age of 21 and apprentices under the age of 25. However, employees under the age of 16 are excluded as are employees who are not liable to UK National Insurance. Benefits in kind liable to Class 1A National Insurance contributions are also excluded from the pay bill.