What is the Apprenticeship Levy?

We’re going to begin with one of the most commonly asked questions to set the scene - what is the Apprenticeship Levy and where did it come from?

The Apprenticeship Levy, which officially came into effect on 6 April 2017, is a government led scheme designed to increase the number of apprenticeships on offer throughout the UK by levying funds from the most successful businesses.

The levy aims to fund three million new apprenticeships in England by 2020.ben-wicks-1201248-unsplash (1)

So how does it work?

  • Regardless of sector, all employers with a payroll of over £3 million per annum (around 2% of UK businesses) are required to pay the Apprenticeship Levy.
  • These businesses are required to pay 0.5% of their paybill to fund the levy.
  • Once a business has started contributing to the levy, it will get access to the Digital Apprenticeship Service (DAS); an online portal where funds can be used to recruit new talent and purchase training.
  • The remaining 98% of UK businesses are still able to take advantage of the levy by working with training providers to create a suitable apprenticeship programme for your business.
  • Non-levy paying business will need to contribute 5% towards the cost of the required apprenticeship and the government will pay the remaining 95%.

Can the Apprenticeship Levy be used to train existing staff?

While the levy is doing a fantastic job in motivating business owners to discover and invest in fresh talent, many employers are reluctant to take on new apprentices and would prefer to invest their levy funds in training their existing staff.

The good news is this is possible, but it needs to be done correctly.


Why would you use the Apprentice Levy to upskill an existing employee?

There is a common misconception that apprenticeships are only available for school leavers or in manual industries, but apprenticeships in 2020 are completely different to what they were in years gone by.

For example, apprenticeships in the UK are awarded at levels 1 to 8, which means a business could use the Apprentice Levy to send one of their current employees on a level 8 apprenticeship and they could come out with the equivalent of a Masters qualification.

How would it work?

In essence, it would work the same as any other apprenticeship.

Once enrolled, an apprentice would spend 80% of their time working as usual, but 20% of their time would be ‘off-the-job’ where they can learn, study for their qualification or get involved with different projects. This doesn't mean they will be off-site for 20% of their time, just that they will need to do something outside of their regular work routine so they can develop new skills and learn from others.

How is the Apprenticeship Levy calculated?

For businesses that are required to contribute to the Apprenticeship Levy there are a number of questions about the amount they have to pay. Including:

  • How is your contribution calculated?
  • How much of the fund will your business have access to?
  • If you’re not paying into the fund you may still have access to levy funds, but how does that work?


The Apprenticeship Levy calculation formula is actually very simple. Any business that has a payroll of £3 million or more per annum must start contributing 0.5% of their payroll costs. So for example, if a business has an annual pay bill of £5,000,000, they would pay £25,000 into the fund every year. However, each business also has a £15,000 levy allowance which is subtracted from what they owe. So the actual amount in this case would be £10,000.

If you’re a levy-paying business (in the 2%) you can gain access to everything you contributed via a digital voucher that can be applied by booking apprenticeship courses.



What can the Apprenticeship Levy be spent on?

One of the mostly commonly asked questions is how Apprenticeship Levy funds can be spent.

What exactly are you allowed to spend levy funds on?

In short, Levy funds must be spent on training employees within your organisation and end-point assessments with an approved training provider. How you train your employees is completely up to you.


However, the important thing to note is the Apprenticeship Funding Rules state that the Levy cannot be spent on:

  • Wages
  • Statutory licences to practice
  • Travel and subsidiary costs
  • Managerial costs
  • Traineeships
  • Work Placement Programmes; or
  • The cost of setting up an apprenticeship programme.

This is partly to prevent misuse of funds, but also to ensure that all apprenticeship courses associated with the levy fund adhere to the same standards and level of quality.

How can you access your levy funds?

If your business meets the £3m payroll threshold and is required to contribute to the Levy, you will receive access to an Apprenticeship Services Account (ASA). This account will then be used to purchase and manage apprenticeship courses directly from the register of government approved programmes.



How does the Apprenticeship Levy Digital Account work?

Whether you’re a big business contributing directly into the levy fund or a smaller business looking to utilise the fund by paying a 5% contribution towards training costs, the Digital Apprenticeship Services (DAS) is your friend.

The DAS is an online portal that is designed to help employers access new apprenticeship standards, find training providers and source funding for apprenticeships through an online service account.

You will only find approved trainers in the DAS portal, and your funds can only spent through the portal itself. This is so the Government can ensure that all levy funds are being used appropriately on courses that are worthwhile and conform to modern standards. This is all part of a broader plan to help the Government hit its ambitious target of creating three million new apprenticeships in England by 2020.


How do you create a DAS account?

Fortunately, the process is relatively simple. All you’ll need to create an account are your Government Gateway login details and your organisation's Companies House or Registered Charity number. You’ll then be invited to sign a contract with the ESFA. Once that’s done, you’ll be able to login and see a breakdown of the levy funds available to you, as well as a forecast of any future funds that you are likely to be able to access.

Once your account is setup, simply select an organisation (likely your own), and start looking for a training provider. You can then add your apprentice and the training provider will receive an application and get in touch to confirm the placement.



How do you use the Apprenticeship Levy strategically?

The main thing you should avoid with apprenticeships is investing in them just for the sake of ensuring that your levy is spent. Employee development should be aligned with your business growth strategy. This will allow businesses to increase retention and futureproof your organisation against the threat of staff turnover.

With that in mind, the Apprenticeship Levy should be used strategically, not just to bring in fresh talent, but also to upskill and develop existing members of staff.


Through the Apprenticeship Levy, training is available for a broad range of experience and ability levels from entry level staff all the way through to the board room, with qualifications ranging from GCSE level right the way through to Doctorates.

Using the DAS

When you use the DAS portal, you should take the opportunity to contact training providers and ask for their advice. Many providers will offer to review a department - or even your company as a whole - to determine how your funds can best be spent.

Other options

If you’re still undecided on how to utilise your levy funds, or you’ve spent some of it but have some remaining, there are still other options. For example, as of April 2019, you can choose to partner with a local business and share your unspent funds with them. This can be an effective way to increase your reputation whilst ensuring your unspent funds are being used in a way that can have a direct impact on your business rather than simply expiring and going back into the system.

Remember, don’t view the levy as a tax; view it as a savings pot that, when used in the right way, can provide a strong return on investment. 



Can you fund your own learning and development programme with the Apprenticeship Levy?

Now we’re going to be focusing on whether or not it’s possible for your business to use levy funds to develop your own learning and development programmes.

Finding the right apprentices

As we have mentioned before, the fund doesn't just have to be used on new people being brought into your business, it can be used to develop existing employees. An apprentice is simply anyone that your business sees in a potential role. It's all about using the levy to develop the right person to benefit your business.

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Choosing the right training provider

Whether you are a large business automatically contributing to the levy, or a smaller business paying to use the fund, the same rules apply. You gain access to the DAS and will be able to contact any of the approved training providers.

But it also possible for you to become an 'employer-provider' meaning you can train your own apprentices and be added to the training provider list.

End-point assessments

Even if you become an employer-provider, you will need to ensure that you choose an approved training company to deliver the end-point assessment from the Register of Apprentice Assessment Organisations. Only apprentices that pass through these end-point assessments will be eligible for funding. 

So in short, it is possible for you to use the levy to fund your own learning and development, providing the end-point assessments are provided by unbiased and Government approved assessors.



When do your Apprenticeship Levy funds expire?

Next, we’re going to talk about the expiration of the Apprenticeship Levy funds and whether your business needs to be worried.

How do levy funds accumulate?

If you’re one of the businesses that needs to contribute towards the levy, your funds will automatically accumulate in a digital account.  The funding accumulation works on a monthly rotational basis for a maximum of 24 months. So, the funds that you have accrued in the first month would be available for you to spend until after the 24th month.

However, these funds do come with a ‘use by’ date which some businesses get nervous about.

When do levy funds expire?

If you don’t spend the funds in your digital employer account within those 24 months they will expire. The Apprenticeship Levy funds decline (and accumulate) on a monthly basis, so if you don’t spend the funds you accumulated in month one, you will lose those funds in month 25.


The Government will start recouping a little bit each month to ‘fill up the pot’ for other businesses. This process is designed to ensure that money goes to where it’s needed to businesses who are willing to use it to pay for apprenticeships.

What should you do before the funds expire?

If you are not going to use your funds before they expire, you are able to apply to have them transferred to a smaller business in your local area. In which case, even if your funds do expire after two years, your contribution is not going to go to waste and will be reinvested in the apprenticeship economy.



What will the Apprenticeship Levy allow you to do?

So far we have established that the levy funds will be spent on apprenticeship programmes to help transform and upskill the workforce. The fund is there, so what will the Apprenticeship Levy allow you to do?

  • Expand your team and hire an apprentice - if your business has fewer than 50 employees, it won’t cost you a penny to employ an apprentice under the age of 19. What’s more, you’ll receive a £1,000 bursary payment as an added incentive.


  • Train your existing employees - apprenticeships are open to everybody, meaning if you’ve got an existing employee looking for a promotion and you’re willing to invest in them, you can enroll them on an apprenticeship course using levy funds.
  • Start your own development plans - As long as your learning and development initiatives hit certain criteria and your candidates can pass official assessments set by recognised and registered bodies, you can use the levy fund to invest in your business.



What courses are available through the Apprenticeship Levy?

We’re now going to look at which courses are available through the Apprenticeship Levy so you can decide whether or not it might be a good fit for your business.

At the time of writing there are almost 5,000 registered training providers in the UK providing a multitude of courses. All of these trainers are vetted and moderated by the Government to ensure they adhere to the same standard of quality and consistency.


However, it is important to know that not all organisations that deliver training courses are also able to run the end-point assessment necessary for your candidate to get their qualification. For that reason, the government has two databases - one for training organisations, and one for end-point assessors or examiners. Normally, employers will use the end-point register to select a course provider and liaise with them directly to enroll candidates.

Apprenticeships can be used to help candidates with everything from basic training to post-graduate qualifications such as Masters and MBAs. The most popular course types in 2020 are business management, finance, engineering and construction, but there are courses available for virtually any field.



The key benefits of the Apprenticeship Levy

We have already discussed a few of the benefits earlier on in this post, but now is a good time to review the key benefits of the Apprenticeship Levy and why it should be on your radar.

  • Filling technical skills gaps - the levy is a fantastic option for businesses that need to plug a skills gap in their team, particularly in the manufacturing and engineering sectors. If you are a contributing business, you can do this at no additional cost. For smaller businesses, you only have to pay 5% of the training costs.
  • The financial incentive - the government wants to hit 3 million new apprenticeships by 2020 and it’s happy to incentivise businesses to help them hit their targets. Businesses can also get bonuses for enrolling young apprentices (aged 16) of £1,000 and those businesses that contribute to the fund will get a very generous allowance.www.ascento.co.ukhubfsthe_key_benefits_of_the_apprenticeship_levy-1
  • Return on investment - ROI is crucial to any business. The businesses who contribute can get a superb return on their investment if they put those funds to good use. It’s not a ‘tax’ or penalty, it’s a way of encouraging businesses to grow. Any unused funds over 12 months are released and made available to smaller businesses - it’s a win-win for the learning economy.


Does the Apprenticeship Levy apply in Scotland, Wales and Northern Ireland?

While the Apprenticeship Levy is a venture designed to increase the number of apprenticeships across Great Britain by 2020, there has been some confusion over its application in Scotland, Northern Ireland and Wales.

The Apprenticeship Levy is a UK-wide venture

Apprenticeships are a devolved policy. This means that authorities in each of the UK nations manage their own apprenticeship programmes, including how funding is spent on apprenticeship training.

It’s one of the reasons Scotland has a different education and student loans system to England, and there are many other key differences.

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Skills policy and apprenticeships are a devolved matter

What this effectively means is that Scotland, Northern Ireland and Wales manage their own apprenticeship programmes, independent of England.

Money raised by the Apprenticeship Levy will be transferred as a bulk payment to Northern Ireland, Scotland and Wales based on how many employees are based in each location. The more businesses (or employers), the greater the funding.

However, there is one crucial difference: levy funds in England must be spent on apprenticeships that are officially registered and moderated, whereas funds in the rest of the UK can be spent however the Scottish, Northern Irish or Welsh authorities decide.


Is there an Apprenticeship Levy age limit?

One of the most common questions people ask is whether or not there are any age restrictions for the Apprenticeship Levy. Far from being a restriction, this is actually one of the ways in which the levy truly shines.

Age is just a number

Traditionally, one point that has put employers off the idea of apprenticeships is that it would involve bringing in young, unskilled students and expanding the payroll. But as we have explained previously, Apprenticeships don’t have to be awarded to young graduates or school-leavers.


In fact, the Apprenticeship Levy also has no age restriction whatsoever. Since 2017, workers aged 24 and over have received 90% of the levy funding, something which was planned by design when the policy was written. However, younger apprenticeships are very much encouraged - and incentivised - with companies receiving a one-off grant of £1,000 for any 16 year old apprentices they take on.


Can the Apprenticeship Levy be spent on graduates?

Naturally, employers who contribute to the Apprenticeship Levy are very keen to see their investment returned. This usually takes shape in the form of recruiting young talent or developing existing staff.

However, what business owners don’t realise is how effective the Apprenticeship Levy can be in transforming their existing graduate recruitment schemes. Instead of hiring new staff direct out of university, employers who utilise the levy can now choose to use degree level apprenticeships to train up staff regardless of their background.

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As of 2020, it’s estimated that over 300 businesses in the engineering, law and financial services industries are in the process of adopting this approach to graduate recruitment. 

Another huge advantage is how quickly candidates can become immersed in workplace culture and processes while earning their degree through apprenticeship programmes. There’s also the question of salary; new apprentices will typically take a lower starting salary than fresh university graduates. 


Can you choose who you spend the Apprenticeship Levy with?

Having access to something like the Apprenticeship Levy is a huge boon to businesses and they’re glad to have it, but not a lot businesses are aware of the various ways in which the levy can be utilised.


We are often asked "Can we choose who we spend the Apprenticeship Levy with?" and the answer is mostly yes, but there are a few rules to bear in mind.

  • No rectrictions - There are absolutely no restrictions on who you can enroll in an apprentice scheme, whether it is an existing employee of any age, an experienced prospect that you’re bringing on board, or a school or college leaver.
  • Selecting your provider - The only thing you need to be mindful of is the database of approved apprenticeship course providers that the Government has put together.
  • Transferring levy funds - Legislation has allowed larger businesses to pass their levy funds to smaller businesses along their supply chain. These business don’t necessarily have to be related, but the only catch is that the giver and recipient of the funds must be in agreement over which apprenticeship courses the funds will be allocated to. 


Can you choose who you spend the Apprenticeship Levy on?

We have already mentioned that there are no restrictions on who you can spend the Apprenticeship Levy funds on, but are there any advantages to choosing one individual over another? Let's find out.

Debunking the myths

There’s a common misconception among the workforce that apprenticeships are for school leavers or younger people who don’t feel like going to university (or don’t have the grades). This is no longer the case because the levy funds are available for staff at all levels – from those who left school at 16 right up to postgraduate level. There really is no limit and no discrimination when it comes to who you can spend levy funds on.


Hiring young apprentices

Despite there being no age limits on apprentices, the Government does incentivise the hiring of young apprentices such as school and college leavers. This is due to a lot of businesses preferring to hire experienced staff and seeing younger employees as a risk. Therefore, the Government offers an extra £1,000 bonus funding for every 16-18 year old.

Upskilling employees

Sometimes larger businesses can get frustrated when choosing what to spend their levy funds on because they don't want to expand their payroll by hiring new staff.

In this scenario, there is the option of upskilling existing employees in preparation for a future promotion. It’s very easy for someone in a mid-management position to go on a year long apprenticeship course and get the skills they need for a promotion.


How to implement an apprenticeship training programme

Now it's time to take a look at how you can put the levy funds into action and implement an apprenticeship training programme throughout your workforce.

So, you've got your funds, you’ve opened an online account and you’re ready to go… what's next?

What do you want to achieve?

The biggest mistake people make is thinking of apprenticeships as young people they bring into their organisation and start at the bottom. Instead, think of apprenticeships as an opportunity for any new or existing employees of any age to level up their skills and gain new qualifications.

Conduct a review of your existing workforce and identify any skills gaps. Then analyse the best way to fill these gaps, whether that is developing existing staff, bringing in juniors or hiring new department heads.


Balance work and education

One important thing to remember with apprenticeships is for all of the growth opportunities there are some concessions to make short-term. Employers will need to be aware that several hours of their apprentice’s week will need to be devoted to study, learning and even passing exams.

Choosing the right training partner

There are literally thousands of training partners to choose from across countless sectors. Start by looking at their completion rates for your sector, some may even specialise in your specialist field. Also consider their location, if you have multiple branches you need a provider that can cater to this so you can maximise your relationship with them.


A brief summary of the Apprenticeship Levy

To wrap up this article, here is a brief summary of the Apprenticeship Levy and the key facts to remember:

  • The levy is paid by large businesses with a pay bill of over £3 million (they pay 0.5% of their total annual pay bill). This amounts to 2% of UK employers.
  • Smaller employers pay just 5% of the cost of their apprenticeship training and the Government pays the rest.


  • All levy paying employers can access their funds through the DAS. The funds in their accounts are available to spend on apprenticeship training in the UK.
  • The levy is there to fund apprenticeship training for all employers - not just new hires.
  • Employers have 24 months to use their funds once they enter their apprenticeship service account, after this point, their funds will expire.
  • Any unused levy funds will be used to enable existing apprentices to complete their training and to pay for apprenticeship training for smaller businesses. The plan is to have £3 million qualified apprentices in the UK by 2020, and we’re already well on our way!