Ultimate Guide to the Apprenticeship Levy 

From May 2017, the way the government funds apprenticeships in England changed with the launch of the Apprenticeship Levy. While this policy has been in place for several years now, many employers in the electrical and wider construction sector still have questions about what it means for them. 

For anyone running a business, or considering taking on apprentices, understanding how the levy works is essential. With skills shortages already challenging the trade, making the most of available funding can help employers grow their workforce while supporting the next generation of qualified electricians. 

What Is the Apprenticeship Levy? 

The Apprenticeship Levy is a government initiative designed to fund apprenticeship training. It applies to employers with a wage bill over £3 million a year. These companies must contribute 0.5% of their annual pay bill into the scheme, minus a £15,000 allowance. The money goes into a digital account that can be used to pay approved training providers for apprenticeship programmes. 

For example, an employer with 250 staff and a pay bill of £5 million would pay £25,000 into the levy. After subtracting the £15,000 allowance, their annual levy cost would be £10,000. This funding then becomes available to spend on apprenticeship training through approved routes. 

Who Needs to Pay? 

Only large employers with wage bills above £3 million must pay the levy. Smaller businesses are not liable but can still benefit from government support. Non-levy paying employers are expected to co-invest in apprenticeship training, paying around 10% of the cost while the government covers the remaining 90%. 

This approach ensures that even small firms—such as regional electrical contractors—can still access funded apprenticeships without the same financial burden as larger employers. 

How the Digital Apprenticeship Service Works 

All levy payments go into the employer’s Digital Apprenticeship Service (DAS) account. Funds are added monthly and must be used within 24 months, otherwise they expire. To minimise losses, employers are encouraged to plan carefully and direct their funds to approved apprenticeship providers quickly. 

The DAS account makes it possible to: 

• Choose apprenticeship frameworks or standards. 

• Select a training provider. 

• Manage payments directly to that provider. 

For every £1 paid into the levy, the government applies a 10% top-up—so funds stretch further than the amount originally contributed. 

What Levy Funds Can Pay For 

Employers can use levy funds for: 

• Training and assessment of apprentices. 

• Apprenticeship standards or frameworks within funding band limits. 

• Retraining existing staff if they need new skills to progress. 

Funds cannot be used to cover wages, travel costs, work placements, or g eneral business expenses. 

Apprenticeship programmes are grouped into 15 funding bands, ranging from £1,500 to £27,000. The band determines the maximum that can be claimed for each training programme. 

Co-Investment and Shortfalls 

If an employer uses all their levy funds or needs more than their balance covers, co-investment applies. In this case, the government funds 90% of the additional cost, with the employer covering 10%. This ensures training remains affordable even if demand exceeds initial levy contributions. 

Incentives for Young Apprentices 

To encourage uptake, employers receive an additional £1,000 incentive for hiring apprentices aged 16–18, or 19–24 if they are care leavers or have additional learning needs. Payments are made in two instalments at months 3 and 12 of the apprenticeship. 

These incentives make it easier for employers to take on younger learners who are starting their careers, while supporting those who may need extra help to succeed. 

Impact on the Electrical Industry 

The Apprenticeship Levy has had a particular impact on the electrical trade. With an ageing workforce and a shortage of qualified sparks, employers are under pressure to bring new people through the system. Yet too many firms remain unsure of how to use their levy funds effectively. 

By investing levy credits into quality training, businesses can secure a pipeline of talent ready to progress from Level 2 Diplomas to the NVQ Level 3 and AM2. Providers such as Elec Training are approved to deliver structured training that meets these requirements. 

Training Routes Available 

Employers can direct levy funds to cover apprenticeships such as: 

• C&G 5357 Level 3 Electrical Apprenticeship – the current standard pathway into the trade. 

• Bespoke electrical apprenticeships developed with approved providers. 

Alongside these, many employers also fund short courses or online modules to upskill staff. Training centres like Elec Training Bridgnorth and Elec Training Kidderminster make it easier for regional businesses to access apprenticeship provision without long travel times. 

For flexible options, employers and learners can also explore online electrical courses, or get practical guidance through apprentice dos and don’ts. 

Planning Ahead 

Employers liable for the levy need to plan their apprenticeship strategy carefully: 

1. Register with the Digital Apprenticeship Service.
   
   
2. Calculate likely levy contributions.
   
   
3. Choose approved training providers.
   
   
4. Map out how funds will be spent over the 24-month window. 

Smaller employers, while not paying the levy, should still consider how co-investment can support their workforce needs. The government’s 90% contribution means apprenticeships remain one of the most cost-effective ways to train staff. 

Why It Matters Now 

The electrical industry faces long-term skills shortages. With older electricians staying on the tools longer and fewer new entrants joining, the pressure is increasing. The Apprenticeship Levy is not just another tax; it’s a mechanism to rebuild the workforce. 

Employers who ignore it risk losing funds they have already paid. Those who engage can build a sustainable pipeline of apprentices who go on to secure their NVQ 2357, AM2, and eventually an ECS Gold Card. 

For learners, it means more chances to access funded training. For employers, it’s an opportunity to strengthen their teams and future-proof their business. 

How Elec Training Can Help 

As an approved provider, Elec Training works directly with levy-paying and non-levy employers to deliver electrical apprenticeships. Whether you are planning your first apprentice hire or looking to maximise levy funds across multiple sites, we can guide you through the process. 

With centres in Bridgnorth, Kidderminster, and across the West Midlands, we make training accessible for regional employers. Our team also offers advice on structuring apprenticeship pathways and combining them with short courses or bootcamps for upskilling. 

The levy is already here. The challenge is making it work for your business. 

FAQs on the UK Apprenticeship Levy and Funding (2025) 

1 – What is the Apprenticeship Levy and why was it introduced?

The Apprenticeship Levy is a 0.5% tax introduced in 2017 on the annual pay bills of UK employers exceeding £3 million, aimed at funding apprenticeship training to increase starts to 3 million by 2020 and address skills shortages in sectors like electrical installation. It supports economic recovery and workforce development. 

2 – Which employers are required to pay the levy?

Employers with an annual pay bill over £3 million are required to pay the levy. 

3 – How much do levy-paying employers contribute and how is it calculated?

Levy-paying employers contribute 0.5% of their annual pay bill, minus a £15,000 allowance per employer. For example, a £4 million pay bill yields a £15,000 levy after allowance. 

4 – What support is available for small businesses that don’t pay the levy?

Small businesses (pay bill under £3 million) receive government funding covering 95% of training costs for apprentices under 19 and 90% for those 19+, up to the funding band maximum. 

5 – How does the Digital Apprenticeship Service (DAS) account work?

The DAS is an online government portal where employers manage apprenticeship funds, recruit apprentices, reserve training, approve payments, and track progress, accessible via GOV.UK with a Government Gateway login. 

6 – What training costs can levy funds be used for, and what can’t they cover?

Levy funds cover apprenticeship training and a ssessment costs up to the funding band maximum (e.g., £12,000–£23,000 for Level 3 Electrotechnical); they cannot cover apprentice wages, travel, or non-approved training. 

7 – What happens if levy funds are not spent within 24 months?

Unspent levy funds expire after 24 months and return to the government; employers can transfer up to 25% to other businesses to avoid loss. 

8 – Are employers able to use levy funds to retrain existing staff, not just new apprentices?

Yes, employers can use levy funds to r etrain existing staff through apprenticeships, provided they meet eligibility (e.g., no prior Level 3 in that sector). 

9 – What financial incentives are available for hiring young apprentices?

Incentives include a £1,000 bonus for hiring 16–18-year-olds (extended to 2026), up to £2,000 for foundation apprenticeships, and 100% funding for under-19s. 

10 – How can electrical businesses and contractors use levy funds to support NVQs and industry qualifications?

Electrical businesses can use levy funds to cover 100% of NVQ Level 3 training costs (up to £23,000 funding band for Electrotechnical Installation), including assessments and CPD like 18th Edition or EV charging. This supports apprenticeships and upskilling for net-zero roles.