The new apprenticeship levy will commence in England from 6 April 2017 at a rate of 0.5% of the employer's 'pay bill'. To exclude smaller employers a £15,000 allowance can be claimed. This will mean that only employers with a pay bill in excess of £3 million will contribute to the levy. To keep the process as simple as possible the 'pay bill' will be based on total employee earnings subject to Class 1 secondary NICs, including all earnings below the Secondary Threshold. Further guidance for employers relating to calculating and paying the levy will be published by HMRC later in the year.

The introduction of the levy will mark a major change in the way that apprenticeships are funded and is part of the government's ambitious plans to introduce 3 million apprenticeship starts in England by 2020. Scotland, Wales, and Northern Ireland have their own separate arrangements for supporting employers to access apprenticeships.

The government will collect the levy via Pay As You Earn (PAYE) and it will be payable alongside Income Tax and National Insurance. Levy paying employers in England will receive funds in a new digital apprenticeship service account, which can then be used to pay for apprenticeships. The governmental responsibility for apprenticeships has recently changed and the levy is now the responsibility of the Skills Funding Agency (SFA) and the Department for Education (DfE). All employers, including those who are not subject to the levy will still get a government contribution to the training and assessment of their apprentices.