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Earnings included in the apprenticeship levy liability calculation

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Summary

How to reconcile the apprenticeship levy in Sage 50 Payroll.

Description

If your annual pay bill exceeds £3 million, you're required to pay into the apprenticeship levy. This liability applies regardless of whether you employ any apprentices.

The amount you need to pay is 0.5% of your annual pay bill. You also have an allowance of up to £15,000 that you can offset against this.

If you're part of a group of connected companies, with separate data for each company, you can split the apprenticeship levy across multiple companies.

 TIP: If you need to check, reconcile and submit the allowance, use our Process and submit the apprenticeship levy article.

Resolution

Earnings in the calculation

The Apprenticeship levy calculation uses the Gross for NI for Apprenticeship Levy, which your software calculates automatically.

Earnings included in the calculation

The apprenticeship levy liability calculation uses your annual pay bill. Of this, it's any earnings that are subject to Class 1 secondary national insurance (NI) contributions:

  • Wages
  • Bonuses
  • Commission
  • Pension payments that are subject to NI

Payments from pensions typically aren't subject to NI. However, employer contributions can be subject to NI in some circumstance. If you're unsure, check with your pension provider.

Earnings not included in the calculation

The calculation doesn't include the following:

  • Earnings of employees under the age of 16
  • Earnings of employees not subject to UK NI legislation
  • Any payment not subject to NI, for example, pension payments which aren't subject to NI
  • Benefits in kind that are liable to Class1A NI
  • Payments to employees that are working abroad and are paying employee only contributions

Download a Payment Summary History report 

The report with this value isn't in Sage 50 Payroll by default, but you can▼ download it here.

  1. In Sage 50 Payroll, click Help then About.
  2. Click the link under the Reports directory heading.
  3. In the folder that opens, double-click the UserDef folder, keep this folder open.
  4. Click the download link below.
  5. Browse to the PAYDL15.report file you've downloaded, right-click on it and click Copy.
  6. Return to the UserDef folder you opened in Step 3, right-click within it and click Paste.

You can now run this report as required. To find the report, click Reports, then click the User Defined (local) folder. Find and run the Payment Summary History Part 2 - By Date (inc. Gross for NIC) report.

The apprenticeship levy calculation

The calculation for the apprenticeship levy liability is:

(Applicable Gross for NIC To Date x 0.5%) - Apprenticeship levy allowance To Date = Apprenticeship levy liability To Date.
TIP: An easy way to multiply by 0.5% is to multiply by the Gross for NIC by 0.005.

Apprenticeship Levy Liability To Date - Apprenticeship Levy liability already paid = Apprenticeship Levy liability This Period.

The Apprenticeship Levy calculation works on a cumulative basis. 

To calculate the Apprenticeship Levy allowance to date, divide your annual Apprenticeship Levy allowance by 12. Then, multiply this by the number of tax months that you've processed in the year so far. 

For example, the default Apprenticeship Levy allowance is £15,000. To calculate your Apprenticeship Levy allowance as of month 3, use the following sum:

(£15,000 / 12) x 3 = £3,750.

Check your apprenticeship levy settings

  1. Click Company then click Legislation.
  2. Click the NI tab.
  3. Click the Edit button beside Apprenticeship Levy Settings.

The settings are:

  • Rate: 0.50
  • Annual Allowance: £15,000.00
  • Annual Threshold: £3,000,000.00

If you prefer, you can wait until you reach the annual threshold before Sage 50 Payroll calculates the apprenticeship levy. To do this, select the Defer calculation until annual threshold is reached checkbox.