Earnings included in the apprenticeship levy liability calculation

How to reconcile the apprenticeship levy in Sage 50 Payroll.

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.

The Apprenticeship levy calculation uses the Gross for National Insurance (NI) for Apprenticeship Levy. Your software calculates this value 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 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 that 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

Payment Summary History report 

From Sage 50 Payroll v32, your software automatically includes the Payment Summary History Part 2 - By Date (inc. Gross for NIC) report.

This report provides the Gross for NI for Apprenticeship Levy value. Use this in the calculations below.

The apprenticeship levy calculation

The calculation for the apprenticeship levy liability is:

(Earnings for NI for Apprenticeship Levy x 0.5%) - Apprenticeship levy allowance To Date = Apprenticeship levy liability To Date.

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 three, use the following sum:

(£15,000 / 12) x 3 = £3,750.

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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.