Apprenticeship Levy: What Employers Need to Know

Funding • 29 September 2026 • 6 min read

Funding • September 2026

The Apprenticeship Levy has been part of UK payroll since April 2017, but the way levy funds can be spent has changed more in the past year than at any point since it was introduced. The government now describes the system as the Growth and Skills Levy, and a set of reforms took effect for new starts from 1 August 2026.

This guide covers who pays, how the money reaches your apprenticeship service account, what changed in August, and what employers who do not pay the levy are entitled to. Funding rules are updated often, so treat it as a starting point and check GOV.UK for the latest position before you make decisions.

Who pays the levy and how much

The levy is charged at 0.5% of an employer’s annual pay bill. Every employer receives an allowance of £15,000 a year to offset against it, which means in practice that only employers with a pay bill of more than £3 million pay anything. Companies or charities that are connected share a single £15,000 allowance between them, so a group cannot multiply the allowance by splitting its payroll.

A simple example: an organisation with an annual pay bill of £5 million has a levy charge of £25,000. After the £15,000 allowance, it pays £10,000 over the year.

The levy is paid to HMRC monthly through PAYE, alongside income tax and National Insurance, and reported on the Employer Payment Summary (EPS). The allowance builds up month by month through the tax year, but any unused allowance cannot be carried into the next tax year.

Where the money goes

The levy is collected across the UK, but the apprenticeship service account applies to England. Employers in Scotland, Wales and Northern Ireland pay the levy in the same way, while apprenticeship funding there is run by the devolved governments.

For employers in England, levy payments appear as funds in an online apprenticeship service account. Those funds can be spent on apprenticeship training and end-point assessment with an approved provider, up to the funding band maximum for each apprenticeship standard. They cannot be used for apprentices’ wages, travel or the cost of managing the programme. Payments to the training provider are taken from the account monthly while the apprenticeship runs.

Because the funds can only pay for training, the levy works best when it is part of a wider workforce plan rather than a cost to be recovered. Our guidance for employers covers the wider reasons organisations invest in apprentices, in both the private and public sectors.

What changed from 1 August 2026

The Growth and Skills Levy reforms leave the 0.5% charge and the £3 million threshold unchanged. What changed is how far levy funds go and how long they last.

The 10% top-up has stopped. The government used to add 10% to the funds entering levy accounts each month. That top-up no longer applies to new funds entering accounts from 1 August 2026.
Funds expire sooner. Levy funds entering accounts from 1 August 2026 must be used within 12 months, down from 24. Funds already in accounts before August keep the 24-month expiry.
Co-investment is higher for older apprentices. When a levy payer runs out of funds, it now pays 25% of training costs for new starts aged 25 and over, with the government paying 75%. Before August the split was 5% and 95%. Apprentices who started before 1 August 2026 stay on the old rate.
Younger apprentices are fully funded. For new starts aged 16 to 24, the government pays the full cost of training and assessment, up to the funding band maximum, once a levy payer’s funds have run out.

For most levy payers, the practical message is to plan apprenticeship starts more carefully across the year. Funds now expire faster, and spending beyond them on apprentices aged 25 and over costs more than it used to.

New options, and some withdrawn ones

The reforms also change what the money can be spent on.

Foundation apprenticeships

Foundation apprenticeships are entry-level routes for people aged 16 to 21, and for those under 25 who have an education, health and care (EHC) plan, are care leavers, or are in or have left prison. They last at least eight months and are available in sectors including construction and the built environment, digital, engineering and manufacturing, health and social care, hospitality and catering, and retail, supply and administration. They are fully funded for levy and non-levy employers, and employers can receive a £2,000 incentive for each eligible foundation apprentice, paid in instalments.

Apprenticeship units

Since April 2026, levy funds can also be used for apprenticeship units: short courses of 30 to 140 hours, delivered over one to 16 weeks, for existing employees aged 19 and over. The first units cover a limited set of subjects, including AI adoption and strategy, electric vehicle charging, solar PV installation and several engineering and manufacturing skills.

Level 7 and withdrawn standards

Since 1 January 2026, government funding for new level 7 (master’s-level) apprenticeships has been limited to apprentices aged 16 to 21, with exceptions for care leavers and people with an EHC plan up to 24. Apprentices who started before that date continue to be funded to completion. In addition, funding was withdrawn from 16 apprenticeship standards for all new starts from September 2026, including Team Leader (level 3), Operations Manager (level 5) and the Chartered Manager degree apprenticeship (level 6). Employers can still pay for these programmes privately, and existing apprentices are funded to the end.

If you do not pay the levy

Most small and medium-sized employers do not pay the levy, and they can still take on apprentices with government support. For new starts from 1 August 2026:

training for apprentices aged 16 to 24 is fully funded, up to the funding band maximum;
for apprentices aged 25 and over, the employer pays 5% of training costs and the government pays the rest;
employers receive £1,000 for each apprentice aged 16 to 18, or under 25 with an EHC plan or care leaver status, paid through the training provider; and
from 1 October 2026, non-levy employers can claim a £2,000 hiring payment for a new apprentice aged 16 to 24, paid in two instalments, with the first payments expected from early 2027.

Employers of all sizes also pay no employer National Insurance contributions on earnings up to £50,270 a year for apprentices under 25. Our guide to apprenticeship pay in 2026 covers the wage side of the cost.

Transferring unused funds

Levy payers can transfer up to 50% of their annual levy funds to other employers, and the transfer allowance now covers both apprenticeships and apprenticeship units. Transfers are a sensible way to use funds that would otherwise expire, and many larger organisations use them to support smaller businesses in their supply chain or local area. The receiving employer needs its own apprenticeship service account, and the sending employer approves each request.

If you host apprentices through an agency, a transfer can sometimes be used to cover their training. Our guide to what an Apprenticeship Training Agency is explains how that model works.

A practical checklist

Check your apprenticeship service account and note which funds entered before 1 August 2026 (24-month expiry) and which entered after (12-month expiry).
Map planned apprenticeship starts against those expiry dates so funds are used rather than lost.
Prioritise apprentices aged 16 to 24 where it fits your workforce plan, as their training is fully funded once your levy runs out.
Review whether any planned programmes use a standard that lost funding in September 2026.
Consider transferring funds you cannot use, and decide early who you want to support.
Ask whether apprenticeship units could cover short, specific training needs for existing staff.

If managing all of this in-house is a stretch, our service to hire an apprentice without the admin headache takes care of recruitment, employment and the paperwork, and we can talk you through how your levy fits around it.

Want help planning your levy spend?

Whether you pay the levy or not, we can help you work out which apprenticeships make sense for your organisation and how they would be funded under the current rules.

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