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The new apprenticeship levy is due to start in April 2017. The levy will apply to employers with payroll bills of over £3 million, some 2% of UK employers. The levy is 0.5% of a firm’s wage bill and will be collected similarly to other payroll taxes. All employers will be given a £15,000 allowance to offset against their levy payment.
The new levy will help pay for apprenticeship training. Employers will be able to recoup the cost of the levy by taking on apprentices and training them using the funding made available from the new scheme. The Government has not revealed yet what percentage of the levy will be allocated to the training.
Currently, the Government pays two thirds of the training and assessment process with the employer funding the final third. The Government, however, pays in full for employers’ incentives, English and maths educational support, as well as additional learning support.
How will it work
Employers will have more freedom to use the allowance and will be able to develop Trailblazer apprenticeships suited to their business sector and needs. This should mean more employer ownership and hopefully more apprentices trained to fill the skills gaps.
The new levy will be collected by HM Revenue and Customs’ through PAYE and funding will then be put into the hands of employers alongside the design of the apprenticeships’ standards.
Calculating the new levy
The new levy is based on an employer’s payroll cost and applied at 0.5%. For example: –
Employer of 250 employees, each with an average gross salary of £20,000
Payroll cost: 250 x £20,000 = £5,000,000
Levy sum: 0.5% x £5,000,000 = £25,000
Applying the allowance of £15,000 would reduce the £25,000 to a levy of £10,000.
The levy is due to be implemented next April, however businesses have recently called for a delay due to economic concerns following the Brexit vote. Businesses are facing a period of uncertainty and need to adapt, particularly, in the short term. The additional cost of the levy will not be helpful while this is happening. The NFDA have also urged the Government to delay the introduction of the levy for at least a year to ensure no unintended consequences such as job losses due to the extra costs to business.