As of 6 April 2017, employers with an annual wage bill of more than £3million must pay the apprenticeship levy towards apprenticeship funding. The levy is charged at 0.5% of the annual wage bill and is reportable to HMRC each month with each employer having an allowance of £15,000 to offset against their levy payment.

This requirement applied from the start of the tax year for businesses which either has an annual pay bill (including any connected companies) in the previous tax year which was more than £3 million or if the business thinks that its annual pay bill for the tax year will be more than £3 million. If the annual pay bill unexpectedly increases to more than £3 million then there is a requirement to start reporting in the month this happens. If the business starts paying the Apprenticeship Levy, it will need to continue reporting it until the end of the tax year even if the annual pay bill turns out to be less than £3 million.

The purpose of the levy is to encourage businesses to invest in apprenticeship programmes to help improve the quality and quantity of apprenticeships.

Each business that pays the apprenticeship levy will have its own account which will record the amounts paid and any uplift provided by HMRC. The Levy can be accessed by the business to help fund apprenticeship training within their business. The funds accrued in this account will expire 18 months after they are credited to the account unless they are spent on apprenticeships.

Any unused funds will be used to help fund apprenticeship training which can be accessed by SMEs.