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Six things you need to know about apprenticeship funding

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Utilised correctly, apprenticeship funding from the levy can help UK organisations operating in England deliver the advanced technical, managerial and professional skills that they are seeking. With the development of higher and degree apprenticeship standards, employers are being put in the driving seat of developing these skills by drawing down apprenticeship levy funding. Do you know if you are entitled to apprenticeship funding? And if so, how much?

Here are six things you need to about apprenticeship levy funding, if you are a levy payer:

1. How much funding will I receive for apprenticeships training?

All approved apprenticeship standards in England have been allocated a funding cap, which sets the maximum core UK Government contribution the government will make for each apprenticeship. The cap depends upon the framework or standard chosen and could include additional incentive payments, however, it will cover costs of training including assessment. To find out more, access the Skills Funding Agency’s Apprenticeship Standards Funding Rules 2016 to 2017.

Use our online apprenticeship levy calculator to work out how much funding you will receive from your levy contributions in year one.

2. When can I access the funding from?

You can start drawing down the funding from 1 May 2017 via the Apprenticeship Service, which is accessible online for all employers operating in England. You can only claim funding from May for apprenticeships that start after May. HMRC will have notified your payroll team about how to register for your digital employer account.

Top tips to get ahead

3. How do I draw down the funding?

To draw down the funding, all employers operating in England will be able to register for a digital employer account. The total amount you contribute to the apprenticeship levy (plus the 10 per cent top-up from the UK Government) becomes the funding available for you and it sits in your account. Once registered, you will be able to view the current balance of your levy and any transactions you have made.

4. How long are the funds collected in my digital employer account available for?

The funding availability works on a monthly rotational basis for a maximum of 24 months. So, the funds that you collected in the first month would be available for you to spend until after the 24th month.

5. What happens if I don’t spend all of the funds collected in my digital employer account within 24 months?

If you don’t spend the funds in your digital employer account within those 24 months they will expire. The funds decline (and accumulate) on a monthly basis, so if you don’t spend the funds you accumulated in month one, you will lose those funds in month 25.

6. What happens if I do spend all of the funds collected in my digital employer account within a year?

If you spend all of the money to fund apprenticeship programmes within the 12 months, then you will move to a 90/10 co-investment funding model where the UK Government will fund 90 per cent of the training and you’ll only be required to fund 10 per cent. The 90/10 funding methodology works on an annual basis and acts as an incentive for employers to further invest in apprenticeship training.

Apprenticeship Levy Calculator

We’ve created an apprenticeship levy calculator, so that you can calculate your first-year contribution.

If you’re not required to pay the levy:

If you have an annual pay bill of less than £3m, you will not be required to make any apprenticeship levy contributions. However, organisations operating in England will still receive government funding for apprenticeship training. In this case, employers will be required to pay in 10 per cent of the apprenticeship training and assessment costs and government will top up the remaining 90 per cent.

What should I do now?

There are three key steps you can take:

  • If you already have apprenticeship programmes up and running in your organisation, then you will need to calculate the amount of apprenticeship levy you will be liable to pay and see how this fits against the budget you have already allocated to apprenticeships. You might find that you will need to expand the amount of apprenticeship programmes you run in your organisation.

  • If you don’t currently have apprenticeship programmes in your organisation but you do have an annual wage bill of £3m or more and will be affected by the levy, then you will need to assess how apprenticeships can drive your organisation forward in terms of performance and productivity. This is where it is useful to conduct a skills analysis - refer to our section on skills needs for future jobs for more information.

  • Talk to the OU. We can help you manage the different aspects of maximising degree apprenticeships in your organisation, so you’re not just spending the levy but you’re implementing apprenticeships in a meaningful way. There are many ways you can upskill and reskill your existing workforce and we can help you identify those opportunities. We also offer an end-to-end managed service and can help you all the way through the process.

The new levy has the potential to help organisations unlock productivity in their workforce by upskilling employees in areas which align to their overall commercial objectives. This will enable them not only to plug current skills gaps, but reshape their workforce to meet the future demands of their business.

Mark Williamson, Partner, KPMG

Why the OU

Flexibility and value

Our flexible training methods – a blend of tutor-supported online, face-to-face and work-based learning – mean your apprentices can fit study around their job and you won’t have staff out at key times. Plus, less time away from the workplace means a more productive team and reduced expenses. As our learning is work-based and accessible 24/7, apprentices can apply their newfound knowledge to their roles immediately.