While the levy is set at 0.5% of an employer’s gross annual pay bill, employers have an allowance of £15,000. So if an employer has a pay bill of £10 million, they will end up paying an annual fee of:
£10 million x 0.5% - £15,000 = £35,000
The levy allowance operates on a monthly basis and accumulates throughout the year. This means you have an allowance of £1,250 a month. Any unused allowance is carried from one month to the next.
The total levy amount is collected monthly by HMRC, and the funding is then made available to employers via a digital account, through which they can pay for training for apprentices. If an employer does not spend their entire levy amount on apprenticeships, then the unspent portion will be made available to other employers to spend on apprenticeships.
If you are part of a group of employers, you must decide what proportion of the levy allowance each employer in the group will be entitled to. This decision must be taken at the beginning of the tax year and will be fixed for that tax year. Each employer will then calculate what they have to pay through the same processes set out above, but using their portion of the £15,000 allowance.
Any apprenticeship levy payment to HMRC is an allowable deduction for Corporation Tax purposes.
Your pay bill will be based on the total amount of earnings subject to National Insurance Contributions. Essentially, any person who is on your payroll and paid through PAYE is included in your pay bill. Earnings include any remuneration or profit coming from employment, such as pay, bonuses, commissions, and pension contributions that you pay National Insurance on.