What is an apprenticeship levy and how does it benefit you?

Mike (CIMA/Accountancy Trainer) Teaching at EMA Training.

What is an Apprenticeship Levy?

All companies are seeking to optimise their recruitment cost and surely yours isn’t any different in that respect. A simple but effective way to help with this is to be conscious of an apprenticeship levy and know how you can use it to your advantage.

First things first, let’s get you up to speed with understanding what an apprenticeship levy is. In simple terms, an apprenticeship levy is a tax that is applied to fund apprenticeship training.

If your company’s annual pay bill is over £3 million, then 0.5% of wages over the 3 million threshold needs to be paid in taxes. This is a government scheme that was introduced in 2017 to try and incentivise companies to implement apprenticeships into their workforce. The main objectives for the apprenticeship implementation were to tackle youth unemployment levels and contribute towards the upskilling of current employees within an organisation. The benefit to the government here is a strengthened economy.

Even if you’ve not got the resources right now to afford the wages of new employees, then you could focus on consolidating and strengthening current employees within your hierarchy. By retraining and retaining them via an apprenticeship that’s based on upskilling, it would help to grow your company. Later down the line, this can help to put you in to a position where you have more resources to expand your workforce because of structural strengthening. We at EMA Training can help you to define and tailor a strategy to your company’s specific growth goals.

The 0.5% of the 3 million pay bill levy compounds and creates your own accumulated money pool which you can use to contribution towards your apprentices training costs. Companies who are above the threshold must contribute to the levy either way which therefore makes hiring an apprentice a no brainer! If you’re a large company, then you’re already contributing towards the cause, therefore why not reap the rewards?


Your financial pool rolls over and allows you two years to utilise it however if it’s not spent within this period, then the government will take it back on a monthly basis. This would be via a levy account which is basically a holding account between the government and your company.

For companies that are over this 3 million threshold, you can hire as many apprentices without incurring extra training costs granted that your levy account can accommodate this. For example, if your companies pay bill is 5 million then 0.5% of anything over 3 million (2 million surplus in this case) is available for you to use to pay for an apprentices training. 0.5% of 2 million is £10,000 therefore if the training expenses for the apprentice is £10,000, then you wouldn’t have to pay a 5% training contribution which in this instance would have equated to £500 if there wasn’t enough in the levy account.

Either way, £500 training fees for an apprentice that you can mould into your company’s own is an extraordinarily good deal. The best part about the apprenticeship levy is that the larger your annual pay is, the more apprentices basically pay for themselves. You could potentially hire or retrain many apprentices without experiencing any training related drawdown.

As for smaller companies, you’d be benefiting too because you’ll still be striking a great bargain even though you’re not obligated to pay the 0.5% levy. Whatever size your company is, you can still take advantage of the apprenticeship scheme!

Companies under the 3 million threshold incur slightly different charges depending on their specific situation. If your organisation employs less than 50 employees, then apprentices aged 16-18 will not incur you any extra charges regarding their training/ skill learning, your only financial obligation in this instance will be to pay them their apprentice wage. Still on the topic of companies with less than 50 employees, if your apprentice is aged 19 or over, then there would be a 5% training contribution, but the rest of the fees will pay funded by the government.

If you employ more than 50 people but are still under the 3 million threshold, then both 16-18 and 19+ year olds will require a 5% training contribution. Again, the government will fund the other 95% of the apprentices training fees.

After reading all the benefits above, it’s hard to not consider the idea of an apprentice in whichever format best suits your current needs. Even if there are training costs involved, they are minimal due to the contribution fees only being a maximum of 5%. Whether you’re a large-scale company or have less than 50 employees and whether you want to hire a new apprentice or retrain someone internally, you would be benefiting enormously.

For more details about apprenticeship levies or if you’re interested in hiring an apprentice/ retaining a current member of your team, feel free to enter your email address below and we’ll get back to you.

Best regards,

EMA Training

Posted by: JessicaTracey
Posted on: 01.06.2023
Posted in: Employer
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