Changes to the apprenticeship funding system

We’re making changes to the way apprenticeship funding works, including:

  • introducing the apprenticeship levy

  • introducing the apprenticeship service - this is an online service that allows employers to choose and pay for apprenticeship training more easily

  • introducing a new ‘co-investment’ rate to support employers who don’t pay the levy (‘co-investment’ is when employers and government share the cost of training and assessing apprentices)

Apprenticeships are a devolved policy. This means that authorities in each of the UK nations manage their own apprenticeship programmes, including how funding is spent on apprenticeship training.

If you’re an employer with operations in Scotland, Wales or Northern Ireland, you may also want to contact your apprenticeship authority:

Read ‘Apprenticeship funding from May 2017’ for full details of what is changing.

Pay the apprenticeship levy

If you’re an employer with a pay bill over £3 million each year, you must pay the apprenticeship levy from 6 April 2017. Read guidance on how to pay the apprenticeship levy.

You will report and pay your levy to HMRC through the PAYE process.

The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017. You’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.

Use the apprenticeship service

Register to use the service

If you are a levy-paying employer, you can now create an account on the apprenticeship service to:

  • receive levy funds for you to spend on apprenticeships
  • manage your apprentices
  • pay your training provider
  • stop or pause payments to your training provider

If you do not pay the levy, you won’t be able to use the apprenticeship service to pay for apprenticeship training and assessment until at least mid-2019, unless you are receiving a transfer of funds from a levy paying employer. See more guidance for non-levy paying employers.

What you can buy with funds in your apprenticeship service account

You can only use funds in your account to pay for apprenticeship training and assessment for apprentices that work at least 50% of the time in England, and only up to the funding band maximum for that apprenticeship.

If the costs of training and assessment go over the funding band maximum, you will need to pay the difference with other funds from your own budget.

You can’t use funds in your account to pay for other costs associated with your apprentices (such as wages, statutory licences to practise, travel and subsidiary costs, work placement programmes or the setting up of an apprenticeship programme).

Read the apprenticeship funding rules for full details of what you can and can’t pay for with funds from your apprenticeship service account.

If you have employees living in England - the ‘English percentage’

The apprenticeship service only supports the English apprenticeship system. The amount of funds in each employer’s account will depend on how many of their employees live in England and the proportion of their paybill paid to these employees. This is called the ‘English percentage’.

HMRC calculates your ‘English percentage’ from the information you provide about your paybill, and uses it to put the right proportion of levy funds in your account. Your latest English percentage will be visible in your account.

Spend funds in your apprenticeship service account

To spend funds in your account, you need to:

1) Choose a training provider

There are 2 different types of apprenticeships to choose from:

  • apprenticeship standards - each standard covers a specific occupation and sets out the core skills, knowledge and behaviours an apprentice will need; they are developed by employer groups known as ‘trailblazers’

  • apprenticeship frameworks - a series of work-related vocational and professional qualifications, with workplace- and classroom-based training

To choose training:

If you’re a public sector body, you will need to follow Public Contracts Regulation 2015 when selecting a training provider.

2) Agree a price and payment schedule

You and your training provider must agree a total price for each apprenticeship, which includes the costs of training and assessment.

For standards this must include the cost of the end-point assessment agreed with the apprentice assessment organisation.

3) Pay for training and assessment with funds through your apprenticeship service account

Once the apprenticeship training you’ve bought has started, monthly payments will be taken from your service account and sent to the provider.

You will see funds entering your account each month after you have declared the levy to HMRC, and funds leaving the account each month as you pay for training.

If you don’t have enough funds in your account to pay for training in a particular month, we will ask you to share the remaining cost of training and assessing your apprentices for that month with the government. We call this ‘co-investment’.

With ‘co-investment’, you will pay 5% of the outstanding balance for that month, and the government will pay the remaining 95% up to the funding band maximum. If your costs go over the maximum, then you must pay the difference out of your own budget.

Share funds with another employer

If you are in a group of companies paying the levy together, your group can already set up a single shared apprenticeship account and pool your funds. Read more about how to register connected organisations.

Levy payers can support apprenticeships in other organisations by transferring a percentage of their apprenticeship funds to other employers. From April 2019 the rate available to transfer increases to 25% of the annual value of funds entering the apprenticeship service account. These funds can be transferred to any employer, including smaller employers in their supply chain, and Apprenticeship Training Agencies (ATAs), to support new opportunities and widen participation in apprenticeships. Levy payers can see their organisation’s annual transfer allowance in their apprenticeship service account.

Levy-paying employers who wish to transfer funds will have to agree the individual apprenticeships that will be funded by a transfer with the employer receiving the funds. Employers receiving transferred funds will only be able to use them to pay for training and assessment for apprenticeship standards. Transferred funds cannot be used to pay for training and assessment for apprenticeship frameworks.

Read more about how transferring apprenticeship service funds will work.

Employers need to take account of state aid rules when receiving funds from other organisations.

A percentage of all the funds you receive as a transfer may be considered as state aid. This represents the amount of co-investment you would otherwise have had to contribute towards the apprenticeship, if funds had not been transferred.

For all starts funded through a transfer before 1 April 2019, 10% of all the funds you receive may be considered as state aid. For starts funded through a transfer on or after 1 April 2019, only 5% may count. This is because the co-investment rate is reducing from 10% to 5% for all new starts from 1 April 2019.

Before accepting a transfer, employers should check how much state aid they’ve already received in any 3 year period, so they don’t go over the limit they’re allowed under ‘de minimis’ funding rules – see guidance on ‘de minimis’ support. The limit an organisation is allowed to receive as state aid is €200,000 in any rolling 3 year period.

How funds enter and expire in my apprenticeship service account

Funds show in your apprenticeship service account on the 23rd day of each month.

The amount of funding entering your account each month is calculated as follows:

  • the levy you declare to HMRC through the PAYE process
  • multiplied by the proportion of your bill paid to your workforce who live in England
  • plus a 10% government top-up on this amount

When you add a PAYE scheme to your account, any backdated levy funds will be added to your account.

Currently funds will be backdated to April 2017 when the apprenticeship levy started, after which funds will be backdated for a maximum of 24 months.

Funds you don’t use will expire 24 months after they enter your account. For example, funds entering your account in September 2017 will expire in September 2019.

Payments from your account to your training provider always use the oldest funds first.

For more information read the apprenticeship technical funding guide.

Changes for employers who don’t pay the levy

Support with apprenticeship costs

Non-levy paying employers will share the cost of training and assessing their apprentices with government - this is called ‘co-investment’.

The co-investment rate has changed for new apprenticeships starting on or after 1 April 2019. You will now pay 5% towards the cost of apprenticeship training. The government will pay the rest (95%) up to the funding band maximum.

All apprenticeships that started before 1 April 2019 will continue at the previous co-investment rate of 10%.

Manage your apprenticeship training and assessment

If you do not pay the levy, you won’t be able to use the apprenticeship service to pay for apprenticeship training and assessment until at least mid-2019, unless you are receiving a transfer of funds from a levy paying employer.

Instead, you’ll need to agree a payment schedule with the provider and pay them directly for the training. The provider must prove that you have paid your contributions as a condition of government paying its contribution.

There are 2 different types of apprenticeships to choose from:

  • apprenticeship standards - each standard covers a specific occupation and sets out the core skills, knowledge and behaviours an apprentice will need; they are developed by employer groups known as ‘trailblazers’

  • apprenticeship frameworks - a series of work-related vocational and professional qualifications, with workplace- and classroom-based training

To choose training:

If you’re a public sector body, you will need to follow Public Contracts Regulation 2015 when selecting a training provider.

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