From 1st August 2026, several important changes came into effect that affect how apprenticeship training is funded in England.
As part of this, the Apprenticeship Levy, now referred to as the Skills & Growth Levy, has undergone several important changes.
The updated rules change how long employers have to spend their Apprenticeship Levy funds, what happens when those funds run out, and how much employers contribute towards apprenticeship training in different circumstances.
While the changes introduce new rules for levy-paying employers, they also increase support for apprentices aged 16–24. This means many employers will pay less towards apprenticeship training than they would have under the previous funding system.
Whether you already use apprenticeships to develop your workforce or are considering hiring an apprentice for the first time, understanding the new funding rules can help you make informed decisions and avoid unexpected training costs.
In this guide, we’ll explain:
- What has changed to the Apprenticeship Levy
- How the new funding rules work
- What happens when your levy funds run out
- How apprenticeship funding differs for apprentices aged 16–24 and those aged 25+
- What the changes mean for your business
What has changed to the Apprenticeship Levy?
The Government has introduced several changes to apprenticeship funding from 1st August 2026.
The most significant changes are:
- Levy funds now expire after 12 months, instead of 24 months.
- The 10% Government top-up has been removed from levy funds.
- Employer co-investment has increased from 5% to 25% for apprentices aged 25+ when levy funds are exhausted, with Government funding reducing from 95% to 75%.
- Apprenticeship training for eligible apprentices aged 16–24 is fully funded, including where a levy-paying employer has exhausted its levy funds.
- Co-investment now only applies to apprentices aged 25 and over.
Together, these changes are designed to encourage investment in younger apprentices while helping employers use their levy funds more effectively.
What is the Apprenticeship Levy?
Before looking at the changes in more detail, it’s worth understanding how the Apprenticeship Levy works.
The Apprenticeship Levy is paid by UK employers with an annual pay bill of more than £3 million. Levy payments are made monthly and can be used to pay for apprenticeship training and assessment.
Employers access these funds through their Apprenticeship Service account and use them to pay approved training providers directly. The levy can only be used for apprenticeship training and end-point assessment. It cannot be used to pay apprentice wages, recruitment costs or other employment expenses.
Employers that do not pay the Apprenticeship Levy can still access Government funding towards apprenticeship training through the co-investment system.
Levy funds now expire after 12 months
One of the biggest changes to the Apprenticeship Levy is the amount of time employers have to use their levy funds.
Previously, levy funds remained available for 24 months before expiring. From 1st August 2026, employers have 12 months to use their levy funds before they expire.
Any funds that are not used within this period will be removed from the employer’s Apprenticeship Service account and can no longer be spent on apprenticeship training.
For employers that regularly invest in apprenticeships, this means planning has become more important than ever. Training programmes, recruitment plans and workforce development strategies may all need to be reviewed more frequently to ensure levy funds are used before they expire.
Why this matters
The shorter expiry period means there is less flexibility to build up levy funds for future recruitment.
If your organisation doesn’t regularly review its levy balance or apprenticeship pipeline, you may lose funding that could otherwise have been invested in developing your workforce.
A regular review of upcoming recruitment, internal progression opportunities and planned apprenticeship starts can help ensure your levy funding is used effectively.
What happened to the 10% Government top-up?
Another significant change is the removal of the Government’s 10% top-up.
Under the previous system, levy-paying employers received an additional 10% contribution from the Government when levy funds entered their Apprenticeship Service account.
From 1st August 2026, this top-up no longer applies.
This means employers will only have access to the levy funds they have paid into their account, making it even more important to plan how those funds are used.
Key takeaway
Although the removal of the top-up reduces the overall value of levy funds available, employers can still maximise their investment by planning apprenticeship starts carefully and making full use of the funding available before it expires.
What happens when your levy funds run out?
Running out of levy funds doesn’t mean you’ll pay the full cost of apprenticeship training.
The amount you contribute depends on the age of the apprentice.
If you’re recruiting an apprentice aged 16–24
If your levy funds are exhausted, eligible apprentices aged 16–24 remain fully funded.
This means you won’t be asked to make a co-investment contribution towards their apprenticeship training. Instead, the Government will fund 100% of the remaining eligible training costs.
It’s important to note that while levy funds are available, training is still paid for from your Apprenticeship Levy account. The additional Government funding only applies if your levy funds have been exhausted.
If you’re recruiting an apprentice aged 25 or over
Different rules apply for apprentices aged 25 and over.
If your levy funds have been exhausted, you’ll contribute 25% of the apprenticeship training costs, with the Government funding the remaining 75%.
This replaces the previous co-investment arrangements and is one of the most significant funding changes for levy-paying employers.
| If your levy funds are exhausted… | Employer contribution | Government contribution |
| Eligible apprentice aged 16–24 | 0% | 100% |
| Apprentice aged 25+ | 25% | 75% |
Planning ahead
The new rules place greater emphasis on workforce planning.
If you’re considering recruiting apprentices after your levy funds have been used, the age of the apprentice now has a direct impact on your training costs.
For eligible apprentices aged 16–24, training remains fully funded even after your levy balance reaches zero. For apprentices aged 25 and over, you’ll need to factor a 25% employer contribution into your training budget.
Can a levy transfer help cover apprenticeship training costs?
If your levy funds are running low, a levy transfer may provide another way to fund apprenticeship training.
Levy-paying employers can transfer unused levy funds to other organisations to support apprenticeship training. If your organisation can secure a levy transfer, those transferred funds could help cover training costs that might otherwise require employer co-investment.
This is particularly important when recruiting or developing apprentices aged 25+, where a levy employer with exhausted funds would otherwise contribute 25% of the training costs.
Levy transfers aren’t guaranteed, so employers shouldn’t assume funding will be available. However, exploring transfer opportunities as part of your apprenticeship planning could help reduce training costs and make available funding go further.
What if your business doesn’t pay the Apprenticeship Levy?
You don’t need to pay the Apprenticeship Levy to benefit from Government funding.
Non-levy employers continue to receive significant support towards apprenticeship training, although the level of funding depends on the apprentice’s age.
| If you don’t pay into the Levy… | Employer contribution | Government contribution |
| Eligible apprentice aged 16–24 | 0% | 100% |
| Apprentice aged 25+ | 5% | 95% |
This means eligible employers recruiting apprentices aged 16–24 won’t contribute towards apprenticeship training costs, while employers recruiting apprentices aged 25 or over contribute just 5%, with the Government funding the remaining 95%.
If you’re looking at recruiting younger apprentices, new funding and incentives are available, including fully funded training for 16–24-year-olds and up to £3000 in additional employer payment incentives in some circumstances. Read our guide to funding and incentives for young apprentices for a full breakdown.
What do the new Apprenticeship Levy rules mean for employers?
The funding changes don’t alter the value of apprenticeships as a workforce development tool, but they do make planning more important.
For levy-paying employers, the reduction in levy fund expiry from 24 months to 12 months means there’s less time to use the funds you’ve paid into your Apprenticeship Service account. Combined with the removal of the 10% Government top-up, it’s more important than ever to review your apprenticeship plans regularly and make full use of the funding available.
At the same time, the changes create new opportunities for employers recruiting younger apprentices. If your levy funds are exhausted, eligible apprentices aged 16–24 continue to receive fully funded training, removing the co-investment costs that now apply to apprentices aged 25 and over.
For employers that don’t pay the Apprenticeship Levy, the funding landscape also remains attractive. Eligible apprentices aged 16–24 continue to receive fully funded training, while apprentices aged 25 and over attract 95% Government funding, leaving employers to contribute just 5% of the training costs.
Taken together, these changes make it worthwhile for every employer to review their apprenticeship strategy, understand how the new funding rules apply to their organisation and plan future recruitment accordingly.
Make the most of the new Apprenticeship Levy rules
The new funding rules create both opportunities and new planning considerations for employers.
Understanding how levy fund expiry, co-investment and age-based funding affect your organisation can help you make better decisions about recruitment, workforce development and apprenticeship investment.
Whether you’re looking to maximise your levy funds, understand how the new rules apply to your business or explore recruiting your first apprentice, our team can help.
Book a Growth & Skills Levy Review to discuss your organisation’s funding options and build an apprenticeship strategy that makes the most of the support available.
Speak to our team
Complete the form and a member of our team will be in touch in the next 48 hours.
Apprenticeship Levy FAQs
If you’re a business in England with an annual salary bill of over £3 million – then you will pay into the Apprenticeship Levy. If your company is part of a group under shared ownership, you’ll likely have one shared levy pot between all organisations in the group.
Your payroll department will calculate, report, and pay your Apprenticeship Levy contributions to HMRC through the Pay as You Earn (PAYE) process, alongside Income Tax and National Insurance.
All your payments are recorded on your Digital Apprenticeship Service account and you can check the balance of your levy pot under the finances section of your account.
Your levy funds can be used to pay for apprenticeship training and assessment costs. However, this does not include other costs associated with apprenticeships such as wages, travel expenses or equipment!
You can use your Apprenticeship Levy funds to recruit new talent across your business, this is a cost-effective way to make sure you protect your organisation from skills gaps and a competitive candidate market.
Your levy funds can also be used to train and develop your current employees – from juniors up to senior management. Whether you have a team member who is looking to upskill and advance in their career, or looking to reskill and move into a different department – our team can help.
You can access your funds through your Digital Apprenticeship Service account. If you don’t have an account, you’ll need to create one prior to your apprentice being enrolled on their programme as it’s a mandatory requirement.
This online service will allow you to financially manage your apprenticeship programmes and help you to estimate your financial spend.
You can see funds appear in your digital account monthly, a few working days after you have confirmed your salary bill and levy contribution to HRMC for the previous month. You can then use the account to set up apprenticeships and authorise payments to training providers.
Yes. Apprenticeship Levy funds expire 12 months after they enter your levy account if they haven’t been used. Funds are spent on a first-in, first-out basis, including any government top-ups.
Because levy funds now expire more quickly than before, it’s important to plan your apprenticeship recruitment and training to make the most of your available budget. If you don’t use your levy funds before they expire, they cannot be reclaimed.
Yes, Levy transfers can be used to cover the costs of apprenticeship training, particularly for medium-sized businesses who do not always qualify for 100% funding support.
Yes, we can! If your organisation has Apprenticeship Levy funds due to expire, our team can help you transfer these funds and generate much-needed apprenticeship opportunities.
Please get in touch with our team to get the process started.
If you’ve used all of the funds in your Apprenticeship Levy account, you can still recruit apprentices through the government’s co-investment model.
From August 2026, once levy funds have been exhausted, the government will fully fund the remaining apprenticeship training costs for apprentices aged 16-24. For apprentices aged 25 and over, employers contribute 25% towards apprenticeship training costs, with the government funding the remaining 75%.