Apprenticeship Levy Calculation

The Apprenticeship Levy was announced in 2015 and introduced to payroll in April 2017. Companies or groups with a wage bill greater than £3 million are liable for the Levy and the connected company rules for a group are the same as for the Employment Allowance.

The Apprenticeship Levy has an Allowance of £15,000, so the first £15,000 of Levy does not need to be paid.

0.5% x £3,000,000 = £15,000

If you are a connected company the Allowance can be divided between the group or just used by a single company and the remaining have zero.

The Apprenticeship Levy calculation is not that complicated but there are a few pitfalls to watch out for. The first is that it is calculated from year-to-date values rather than on an individual pay run, including the Allowance. The Allowance is an annual value and so is divided across the tax year and builds in increments of 1/12th amounts. The second is that the Levy is a tax month value, so monthly payrolls will be fine but other pay frequencies will see more variation with pay periods due to rounding.

Examples

(Remember to use Year to Date values as it is a cumulative calculation rather than per period)

( 0.5% x Pay subject to NI ) - Allowance - Amount paid = Levy Due

1. The annual Allowance is £15 000 per company/group and builds at 1/12th per tax month, so in May there would be 2/12th of £15 000 or £2 500.

Table 1
Month	Wage Bill	Pay Period Levy	Year-to-date Levy
April	£260,000	£50	£50
May	£240,000	(£50)	£0

2. The annual Allowance is £6000 for this company as it is part of a group and the Allowance has been shared. This means the allowance builds at £500 per month and in May there would be £1000 of allowance available.

Table 2
Month	Wage Bill	Pay Period Levy	Year-to-date Levy
April	£260,000	£800	£800
May	£240,000	£700	£1,500

An organisation with an Allowance and a variable payroll could see their Levy flip between positive and negative each month but the year-to-date will always be zero or greater. If the organisation has zero Allowance the Levy will only grow as the year progresses.

Reporting the Levy to HMRC

The Levy is reported as part of the EPS (Employer Payment Summary) part of the RTI (Real Time Information) submission with your payroll. The EPS will also include items such as SMP reclaimed and the Employment Allowance indicator.

Accessing the Apprenticeship Funds

Accessing funding for apprentices is outside the scope of payroll but for larger companies, the amount of funding available is linked to the Levy paid. Even if an employer does not pay Apprenticeship Levy they can still access the apprenticeship funding. Access to the funding is via the Government One login account and an apprenticeship service account is required.

See below for further details:

Government Guidance Pay Apprenticeship Levy

Government Guidance Manage Apprenticeship Funds