How the Apprenticeship Levy Calculator works – A Complete Guide
First of all, the Apprenticeship Levy came into force in April 2017, charging organisations with an annual wage bill of more than £3 Million an additional 0.5%. This amount is kept in a levy fund which can be used only on apprenticeship training of existing and new staff. So now the questions that arise are “How much apprenticeship levy have you got?” and “What can you do with this money?” To know answers to these queries, you need a handy Apprenticeship Levy Calculator.
‘NowSkills’ are experts in delivering digital/IT apprenticeships and can help employers in the North West of England with apprenticeship levy calculations, levy funding and digital account service set up. First of all, before we discuss the related services offered by us, let us first discuss how to do Apprenticeship Levy calculations.
How to Calculate Apprenticeship Levy Amount?
Each UK employer earning more than £3 million per annum will have an annual levy allowance of £15,000. As a result, this counterbalances the levy they must pay. In addition, the apprenticeship levy will be paid monthly to Her Majesty’s Revenue and Customs (HMRC) through the Pay-As-You-Earn (PAYE).
The following are two simplistic examples of how the levy calculations will work on a yearly basis. Furthermore, these examples do not highlight that the allowance is to be provided in equal monthly instalments of £1,250 and that the amount is to be paid on the monthly basis.
Example 1: An employer who will be eligible to pay the levy
First of all, an employer with an annual income bill of £6,000,000:
Levy sum will be: £6,000,000 x 0.5% = £30,000
Subtracting allowance of levy: £30,000 – £15,000 = £15,000
As a result, the employer will have to pay £15,000 per annum as an apprenticeship levy.
Example 2: An employer who does not have to pay the Apprenticeship Levy
An employer with an annual income bill of £2,500,000:
Levy sum will be: £2,500,000 x 0.5% = £12,500
subtracting levy allowance: £12,500 – £15,000 = £0 levy payment per annum
Examples of Levy calculations and total bills
The examples given above do not substantiate the impact of major fluctuations in the wage bill occurring throughout the year. Let us consider another scenario where the pay bill sums up to be £3m however, has an occasional peak to it in July and June:
|WAGE BILL||TAX MONTH|
Furthermore, the calculation of the levy each month would be as shown in the following table:
|Tax Month||Pay Bill||Pay Bill||Pay Bill x 0.5%||Allowance||Levy||Paid per month|
The Apprenticeship Levy Calculator explanation to the above table is as follows:
1st Month: £250000 x 0.5% = £1,250 levy
Cumulative levy allowance = £1,250, i.e.
Levy payable 1st month is NIL as £1,250 levy is less than the levy allowance
2nd Month: £400000 (£250000 + £150000) x 0.5% = £2,000
Cumulative levy allowance £2,500
Levy payable to 2nd month is NIL as £2,000 levy is less than the levy allowance (£2,500)
Levy paid in 2nd month = levy payable to 2nd month – levy paid to 1st month = 0 – 0 = 0
3rd Month: £950000 (£250000 + £150000 + £550000) x 0.5% = £4,750
Cumulative levy allowance £3,750
Levy payable to 3rd month is £4,750 – £3,750 = £1000
Levy paid in 3rd month = levy payable to 3rd month – levy paid to 2nd month = £1000 – 0 = £1000
4th Month: £1400000 (£250000K + £150000 + £550000 + £450000) x 0.5% = £7,000
Cumulative levy allowance £5,000
Levy payable to 4th month is £7,000 – £5,000 = £2,000
Levy paid in 4th month = levy payable to 4th month – levy paid to 3rd month = £2,000 – £1000 = £1,000
5th Month: £1600000 (£250000 + £150000 + £550000 + £450000 + £200000) x 0.5% = £8,000
Cumulative levy allowance £6,250
Levy payable to 5th month is £8,000 – £6,250 = £1,750
Levy paid in 5th month = levy payable to 5th month – levy paid to 4th month = 1,750 – 1,000 – 1000 = -£250
As a result, the employer gets a credit of £250 that month. Even more, this may be used to counterbalance other Pay-As-You-Earn liabilities.
6th Month: £1800000 (£250000 + £150000 + £550000 + £450000 + £200000 + £200000) x 0.5% = £9,000
Cumulative levy allowance £7,500
Levy payable to 6th month is £9,000 – £7,500 = £1,500
Levy paid in 6th month = levy payable to 6th month – levy paid to 5th month less credits paid to month 5
= £1,500 – 1,000 – 1000 – (-£250) = -£250
Apprenticeship Levy Calculator Conclusion
First of all, the calculation continues in the same way for each of the 7th-12th months. Therefore, the firm will get a credit of £250 per month.
The wage bill for the above data of an organization does not exceed £3m for the year hence, there is no levy due overall. In contrast, the employer has to pay the levy for 3rd & 4th month and then receive allowances for the extra amount paid in the next months.
We Would Love to Assist You
Apart from providing the employers with an easy automated solution to calculate the Apprenticeship Levy, furthermore we provide help to our clients on the following.
- Registering of apprenticeship training providers
- Levy funding & apprenticeship funding bands
- Digital account service set up
- and any other query you may have
Most noteworthy, we are looking forward to hearing for any queries you may have regarding Apprenticeship Levy calculator, funding or how to get registered. Please certainly contact us at https://nowskills.co.uk/nowskills/about/contact-us/