What is the Apprenticeship Levy?

Since 6 April 2017, employers must pay the Apprenticeship Levy if they meet the threshold set down by HMRC.

This is an additional charge of 0.5% added to an employer’s National Insurance contributions bill but only paid by employers with an annual wage bill of more than £3 million.

However, not just large employers are affected. Medium sized businesses with a workforce of 100 people and an average salary of just over £30,000 will take companies over the threshold.

What does this mean for your payroll?

Your pay bill is made up of the total amount of your employees’ earnings that are subject to Class 1 National Insurance contributions. Employees’ earnings include payments made such as wages/salaries, bonuses, commissions, expenses and pension contributions.

The Apprentice Levy is not charged on benefits in kind (BIKs)

There is a levy allowance of £15,000 per year to offset against your levy payment of 0.5%.

The employer must let HMRC know whether they need to pay the Apprenticeship Levy and include it in their usual NIC payment to HMRC. This needs to be done electronically by the 22nd of the following month.

What it means to your business

Smaller companies that do not have to pay the levy can benefit from the apprenticeship training fund. If they take on an apprentice, they will contribute 5% of the cost of training and the government will pay the remaining amount up to the funding band maximum. For apprentices that started before 1 April 2019, employers must pay 10% towards their training and the government pays the remainder.

By identifying areas in your organisation where training is most needed, many employers will have the opportunity to ensure that the Apprenticeship Levy works in favour of their organisation.

Businesses with fewer than 50 employees won’t pay anything if they employ apprentices under the age of 18. If you take on employees aged between 19 and 24 who have been in the care of their local authority, or their local authority has provided them with an education, health or care plan the same applies.

Find out more about the Apprenticeship Levy on www.gov.uk and www.apprenticeships.gov.uk

What it means to your employees

Taking on an apprentice has many advantages, including the fact that you get an additional employee who can be trained and guided towards a skilled role, and it also means additional support for existing employees.

Why use Sage 50 Payroll?

Sage is in constant contact with HMRC to ensure their payroll software is in line with its legislation and that they keep up to date with any changes. Sage 50 Payroll is constantly updated with all new PAYE legislation, including the Apprenticeship Levy.

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