In the 2015 Autumn Statement, George Osborne announced an Apprenticeship Levy that will come into effect in April 2017. The purpose of this scheme is to help fund apprenticeships and “invest in Britain’s future”, but the question is, who will foot the bill? Probably you.
Many large employers (including umbrella companies) will be forced to take on the levy. If you are a contractor working via an umbrella company, you are likely to bear the cost.
What is the Apprenticeship Levy?
The Apprenticeship Levy is a duty that employers in large companies will have to pay to help subsidise apprenticeships offered throughout the UK.
Large companies will pay the levy at a rate of 0.5% that will reportedly raise £3bn to create three million apprenticeship places by 2020. Only employers with a payroll bill of over £3 million will pay the levy. However, businesses with a wage bill of under £3 million p.a. remain unaffected due to the £15,000 exemption currently in place.
How will the levy affect contractors and what will change in your take home pay?
Put simply, the cost of the Apprenticeship Levy could filter down to the ‘end consumer.’ If you are a contractor operating through an umbrella company, you can expect the administration fees you pay to increase from April 2017.
This increased fee will further reduce the take home pay of Umbrella Company employees, who will already have had to absorb the losses associated with the removal of their Travel and Subsistenceclaims from April 2016.
While apprenticeships are certainly an essential method of supporting Britain’s future workforce, you should not have to be personally and financially responsible for the cost if there are other options available to you.
How can I avoid further deductions to my take home pay?
You have the decision making power to avoid the financial impact of this levy on your personal take home pay. One option to avoid being affected is to switch payroll solution and opt for your own limited company instead.
A limited company removes any other financial burden you may otherwise face when operating via an umbrella company.
What’s more, a limited company provides many tax saving benefits to help increase your take home pay further.