One of the biggest incentives to get Levy-paying employers to engage with apprenticeship training is the offer of government top-ups that’ll let them get out more than they put in.

But how will these work in practice and are there any issues that may affect Apprenticeship Levy top-up payments? In this guide, we’ll find out.

Apprenticeship Levy top-ups: How they’ll workApprenticeship Levy Top Ups

The goal of the Levy is to enhance the country’s productivity and address emerging skills gaps by generating three million apprenticeship starts by the end of the decade.

As well as getting employers to provide more funding for this effort, the government also seeks to promote engagement with the new apprenticeship schemes that are being rolled out. To that end, the incentive top-up payments were first announced in the aftermath of the 2016 Budget.

Employers are responsible for calculating, then paying, their Levy contributions and once the funds reach their Apprenticeship Service Account (ASA) each month, the government will apply a 10% top-up to the amount they have available to spend on apprenticeship training in England.

This means that for every £10 that enters your account, the government will add another £1.

What factors might affect your Apprenticeship Levy top-up payments?

Allowance: Each Levy-paying employer will get a £15,000 allowance to offset against their Levy payments. Your Levy contribution is set at 0.5 per cent of your annual salary bill and then £15,000 is deducted from the total figure.

As such, if your Levy contribution after this deduction is nil, you won’t receive a top-up payment, or have any ASA funds available to spend on training.

Group organisations face another layer of complexity, since for the purposes of the Levy, they’re classed as one employer and given a single £15,000 allowance to work with. This can be deployed in a couple of ways - either concentrated in a single company within the group or shared across two or more organisations.

On the upside, groups have a bit more flexibility in terms of how to use their Levy funds - and can opt to utilise payments within one - or several - of their constituent companies.

Workforce distribution: The Levy is a tax, which means it applies across the UK, however, several years ago - devolved governments in Scotland, Wales and Northern Ireland took the reins on skills and training-related policies.

Apprenticeship Levy workforce distributionThis means that while you’ll pay in 0.5% of your payroll on your entire workforce, you’ll only be able to access the funds (and the government’s 10% top-up) on the amount that relates to your workforce in England.

The UK’s devolved nations haven’t decided what to do with their share of the Levy (which is parceled out according to the Barnett formula), but consultations on the issue are in the works within each country.

You may not pay the Levy year-round: For employers with a pay bill that varies across the course of a year, it’s possible that you will only pay the Levy in some months and not in others.

As such, the amount entering your digital account and the top-up you receive could vary greatly month on month.

Deadlines: If you don’t spend your Levy, and government top-up, within 24 months of it entering ASA account, you’ll lose out on the entirety.

Extras: Any of the extra funding associated with taking on young apprentices or those from deprived areas isn’t added to your ASA account and in some cases, may be paid directly to the training provider. The same goes for any grants that your local authority may provide.to your ASA account and won’t be subject to the 10% top-up - in some cases this is paid directly to the training provider you’re working with. The same goes for any grants you may receive from your local authority.

What you can spend your money on

Apprenticeship Levy funds can be spent on the costs of any apprenticeship-based training and end point assessment within England. As mentioned above, if you’ve got workers situated in any other UK nations, you’ll be unable to transfer your funds into the apprenticeship programmes of these countries.

You can’t spend your funds on any other costs that you may apprenticeship training, such as wages, travel costs, subsidiaries or licenses needed to practice.

What if you overspend?Apprenticeship Levy allowances

Those who are only paying a marginal Levy might not have enough funds in their ASA account to cover the cost of training and assessment for all the apprentices they want to take on.

In cases where you’re in danger of using up all the funds in your account, it’s possible to pay for the remainder of the training using the system of co-investment, whereby the government pays 90% of the training costs, with the employer making up the remaining 10%.

And you?

Hopefully, we’ve managed to shed some light on the complexities of Apprenticeship Levy finance, but if you’ve got any questions on any of the topics we’ve covered above, be sure to let us know via Twitter or LinkedIn.

And if you’re looking for bespoke financial advice on the Apprenticeship Levy, or want a tailored assessment on how best to deploy your funds, be sure to get in touch with our team of Levy experts today: 

Talk to our Levy team →