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Government funding for apprenticeships in the UK is going to change from April next year. Is your company geared up for the new apprenticeship levy that is to be introduced?

The latest proposals were released by the Government in the middle of August, and, after a consultation period lasting until September, the final proposals will be confirmed in October and will come into effect at the start of the next tax year (7th April 2017).

So, this is what we know so far...

There will be changes to the funding for apprenticeship training for all employers in the UK and some companies will have to contribute to a new apprenticeship levy, depending on the size of their business.

First up, if you are an employer with fewer than 50 employees then you won’t have to pay a single penny towards apprenticeship training for young people aged 16-18. As an employer with so few staff, the government will pay 100 per cent of the training costs for your apprentices in that age bracket.

If you employ more than 50 members of staff then you will be required to contribute 10 per cent of the costs of training an apprentice. The government will then pay the other 90 per cent of apprentice training costs.

Incentives of £1,000 to £2,000 per apprentice will also be available to employers who take on 16-18 year olds depending on whether the young person has an education, health and care (EHC) plan or not.

Roughly 1 in 4 small businesses already employ at least one apprentice in their business, with 7 in 10 aged 16 to 19 years old. It is hoped that the new cash incentives and help with training costs will encourage even more small enterprises to offer apprenticeships to young people in the UK.

Commenting on the proposals, national chairman for The Federation of Small Business, Mike Cherry, said: “Smaller businesses are taking on more apprentices than ever before. What’s more, a quarter of our members say they are considering employing an apprentice in the future, but only if they feel they’re affordable.”

“Getting apprenticeship reform right, including changes to existing funding arrangements, is key to apprenticeship growth among small businesses. Many small company owners are committed to apprenticeships, but many more continue to be worried about the time and personal commitment required,” added Mr Cherry.

So, that, in a nutshell is the new position regarding training costs for apprentices from the start of the next tax year. What about the apprenticeship levy itself?

Well, it depends how much your total pay bill is...

If your total pay bill is less than £3 million (which is the case for around 98 per cent of UK businesses) then you won’t need to pay the levy at all. Once your pay bill rises above £3 million then you will be subject to paying the new apprenticeship levy from April 2017.

The apprenticeship levy will be one half of a per cent of the employer’s total pay bill but the company will receive an annual allowance of £15,000 which they will be able to offset against their liability.

Like income tax and National Insurance contributions, the apprenticeship levy will be payable through the Pay As You Earn (PAYE) scheme.

As for the practicalities of how companies will be able to easily navigate the new apprenticeship levy, a recent employer bulletin from the Government explains:

“From next year, employers will be able to use the new online service which will help businesses to search for apprenticeship training and recruit an apprentice, as well as providing access to levy funds. More online tools will be available to levy paying employers as part of the digital apprenticeship service over the next year. By 2020, all employers will be able to use the digital apprenticeship service to select and pay for training and assessment for apprenticeships.”

You can find out more about the Apprenticeship Levy, how it works and see some examples of what you might have to pay on the GOV.UK website.

What do you think about the apprenticeship levy? Will it affect your business? Do you think it will incentivise companies to train up more apprentices? Or could it have the opposite effect?