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All change for apprenticeships: the new funding system for employers

Article posted: 24th March 2017

The new Apprenticeship Levy comes into effect on 6 April and heralds significant changes to the way McBrides Fact Sheet on the Apprenticeship Levyapprenticeships will be funded for all employees. Click on the link to download our factsheet outlining some key aspects of the new system.

What is the Apprenticeship Levy?

The Levy was announced in the 2015 Budget to fund the Government’s target of three million apprentices in England by 2020.

The Levy is effectively a new tax which will be payable by larger employers where their annual ‘pay bill’ is over £3million. Non-Levy paying businesses will still need to contribute towards the cost of training apprentices, although some concessions may apply, but will not be subject directly to the Levy.

How is the Levy calculated?

The Levy is calculated as 0.5% of the ‘pay bill’, but there is an annual allowance of £15,000 for all employers to set off against the Levy. The Levy will be reported and collected using the PAYE process. The Skills Funding Agency has provided an indicative tool, which can be used to estimate any liability to the Levy: https://estimate-my-apprenticeship-funding.sfa.bis.gov.uk

Should you consider taking on Apprentices?

The Government has stated that the new Levy system will allow it to double its investment in apprenticeships by 2020 from 2010 levels, while also encouraging employers to take on apprentices.

Employers may find that an apprenticeship scheme can help to develop their workforce and fulfil their business’s needs, as part of their overall strategic planning. Apprenticeships should be sustainable and address a real business need.

Tax breaks are already in place for employers of apprentices such as 0% National Insurance.

For advice and assistance on all aspects of managing your business, including employing staff, please feel free to contact us.

The content of this document is intended for general guidance only and, where relevant, represents our understanding of current law and HM Revenue and Customs practice. Action should not be taken without seeking professional advice. No responsibility for loss by any person acting or refraining from action as a result of the material in this blog can be accepted and we cannot assume legal liability for any errors or omissions this blog may contain.

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