The apprenticeship levy example calculation

Each month the cost of the apprenticeship levy The Apprenticeship Levy is a UK tax on employers which is used to fund apprenticeship training. It is payable by all employers with an annual pay bill of more than £3 million, at a rate of 0.5% of their total pay bill. It is collected through PAYE alongside other employment taxes. will be:

(0.5% of total pay bill YTD The cumulative amount of an employee's earnings or deductions from the beginning of the current fiscal year up to the current pay period.) - ((company's annual levy allowance÷12) × month number) = Amount due to HMRC His Majesty's Revenue and Customs is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support, the administration of other regulatory regimes including the national minimum wage and the issuance of national insurance numbers. for apprenticeship levy.

Step 1: Find the employers pay bill. This is the Year to date figure

How is the employer’s pay bill calculated?

For the purposes of the levy, an employer’s pay bill is all of those employee earnings liable to Class 1 Employees under State Pension age earning more than the threshold a week from one job - they’re automatically deducted by the employer. secondary National Insurance A system of contributions paid by workers and employers in the UK, which funds various state benefits, such as the State Pension and Jobseeker's Allowance. contributions (NICs), this also includes all earnings below the Secondary Threshold The Secondary Threshold is an amount set each year by HMRC at which employers start paying National Insurance. (ST The Secondary Threshold is an amount set each year by HMRC at which employers start paying National Insurance.).

Pay bill also includes the earnings of employees under the age of 21 and apprentices under the age of 25. This is because an employer is still liable to pay Class 1 secondary NICs on those earnings, but at a rate of 0%, (which means it may seem to the employer as if they do not have NICs liability for these employees).

Pay bill does not include any earnings where an employer is not liable to pay Class 1 secondary NICs.

Step 2: Multiply the figure from Step one by 0.5%.

Step 3: Calculate the annual allowance and divide by 12.

£15,000 / 12 = £1,250

Step 4: Multiply the figure from step 3 by the tax month you are calculating. Example: If you are calculating August (Month 5) £1,250 x 5 = £6,250.

Step 5: Take the allowance calculated in 4 from the Year to date figure in Step 2.

Step 6: Take away any allowance already paid Year to date.

You can get more information from GOV.UK
https://www.gov.uk/guidance/pay-apprenticeship-levy