Apprenticeship Funding and the Growth and Skills Levy
Funding Guidance
Trusted by employers to deliver apprenticeships in AI, digital, data, IT and accountancy.
Apprenticeship funding at a glance
Apprenticeship Funding Summary
Apprenticeship training in England is funded through the UK government's Apprenticeship Levy or via co-investment. Large employers with a pay bill over £3 million pay the levy (0.5% tax minus a £15,000 allowance) to fund training. Non-levy employers usually receive 95% government funding for eligible apprenticeship training, with the employer contributing 5%, unless full funding or a levy transfer applies. Under the new Growth and Skills Levy reforms, the system gains additional flexibility, introducing modular apprenticeship units for existing staff, reducing minimum programme durations to 8 months, and restricting Level 7 funding to young apprentices starting January 2026.
On This Page
Which funding route applies to your organisation?
I pay the apprenticeship levy
For employers with an annual UK pay bill over £3 million.
- Estimate your levy contribution
- Plan for the 1 August 2026 account changes
- Use levy funds for apprenticeships and eligible apprenticeship units
I do not pay the apprenticeship levy
For smaller employers and SMEs with an annual UK pay bill below £3 million.
- Check government contribution routes
- Understand 95% funding, full funding and levy transfers
- Review under-25 support and upcoming incentives
Levy-Paying Employers
Businesses with payroll over £3M contribute 0.5% via monthly PAYE, topped up by 10% (ending Aug 2026), to fund training directly.
Co-Investment Funding
Non-levy employers usually receive 95% government funding for eligible training, with the employer contributing a 5% co-investment.
Fully Funded Training
SMEs under 50 staff pay £0 for apprentices aged 16-18, under-22s in some circumstances, or under-25s EHCP/care leavers. Expanded for under-25s from 2026/27.
Cash Incentives
Get £1,000 for young apprentices (all SMEs), up to £2,000 for recruiting young starters (from Oct 2026), and National Insurance savings for under-25s.
The Growth and Skills Levy
The Apprenticeship Levy is transitioning into the Growth and Skills Levy, a policy reform designed to give employers greater control and flexibility over training delivery. It introduces new pathways to solve skills gaps while retaining apprenticeships as the core foundation.
These flexibilities are intended to address immediate training needs. They allow levy funds to be used not only for full apprenticeships but also for short, flexible training courses known as apprenticeship units and support changes to programme structures to make training more accessible to existing staff.
Key Flexibilities Introduced
- Apprenticeship units: Flexible training blocks to upskill existing staff in critical areas.
- Reduced Durations: Shorter courses of 8 months where learners have prior experience.
- Expanded Transfer Rules: Levy payers can transfer up to 50% of annual funds.
Apprenticeship Levy and Funding System Explained
Funding for levy-paying employers
How the Levy Operates
The Apprenticeship Levy is a 0.5% tax levied on employers with an annual pay bill exceeding £3 million. A £15,000 annual allowance is applied, which offsets the cost, ensuring only large employers pay the charge.
Levy contributions are collected monthly by HMRC via PAYE and added to your Digital Apprenticeship Service (DAS) account.
10% Government Top-Up
The government adds a 10% top-up on funds entering accounts monthly. Note: This top-up will stop for new funds entering accounts from 1 August 2026.
Levy Expiry Rules
Funds entering your account on/before 31 July 2026 expire after 24 months. New funds entering accounts from 1 August 2026 expire after 12 months if unused.
Levy Rules Summary
- Annual payroll threshold: > £3,000,000
- Levy rate: 0.5% of total annual payroll
- Allowance: £15,000 tax offset per year
- Levy Transfers: Transfer up to 50% of annual funds to supply chain or SMEs
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Managing Your DAS Account
The Apprenticeship Service (DAS account) is the primary digital gateway to access and manage your funds. Solveway helps guide employers through account creation, PAYE scheme linkages, and cohort approvals.
Setup Checklist:
- Register on the Apprenticeship Service.
- Link your organisation details and PAYE scheme.
- Confirm signing the employer agreement.
- Grant permissions to training providers to manage cohorts.
Levy Payer Changes: What's Changing in 2026?
Funding for SMEs and non-levy employers
1. Current Funding & Co-Investment
Non-levy employers usually receive 95% government funding for eligible apprenticeship training, with the employer contributing a 5% co-investment, unless full funding or a levy transfer applies.
Fully Funded Exemptions:
Government pays 100% (£0 cost) for apprentices aged 16–18, aged 19–21 for businesses with under 50 staff, or aged 19–24 for care leavers/EHCP.
2. Future Under-25 Full Funding
Starting in the 2026 to 2027 academic year, the government will fully fund apprenticeship training for all learners aged under 25 at non-levy paying businesses.
Growth & Skills Levy Support:
This eliminates the standard 5% co-investment cost entirely for apprentices within this age bracket, reducing the employer contribution to £0.
3. October 2026 Recruitment Payment
From 1 October 2026, eligible non-levy employers will receive a recruiting payment of up to £2,000 when hiring new apprentices aged 16 to 24.
Key Criteria:
The apprentice must have joined the business within the previous 3 months. Payments are made directly to the employer at milestones (first payment after 90 days).
SME Co-investment Protection
The standard co-investment rate for non-levy employers and SMEs remains at 5%. The 25% co-investment rate change does not apply to standard non-levy cohorts; it applies solely to levy-paying employers whose levy funds are fully exhausted.
Funding & Residency Conditions
Funding rules depend on employer type, learner eligibility, start date, programme and funding route. Full funding is subject to learner age, business size, and specific residency conditions. The £2,000 recruiting payment starting October 2026 is subject to published government conditions and is not guaranteed for all hires. Solveway confirms eligibility during onboarding.
Non-Levy Apprenticeship Funding Explained for SMEs
Apprenticeship units and shorter training
Under the Growth and Skills Levy, the government has introduced short, flexible training courses known as apprenticeship units. These units are designed to upskill existing staff in critical areas without requiring a commitment to a full, multi-year apprenticeship programme.
Solveway is approved to deliver apprenticeship units and can support employers to use this shorter, flexible training route to develop AI, digital and workforce skills.
First Critical Skills Areas
Apprenticeship units target specific, high-value technical capabilities. The initial launch includes training pathways in:
Apprenticeship Unit Funding Conditions
Aged 19 and over
Learners must have reached 19 years of age at the start of their training.
Already Employed
Restricted to existing staff; not available to unemployed learners.
30 to 140 hours
Course duration must consist of 30 to 140 total delivery hours.
1 to 16 weeks
Training must be delivered over a period of 1 to 16 weeks total.
Critical Skills
Limited to short, flexible courses in high-value technical sectors.
Employer incentives and additional support
Employers are eligible for cash incentive payments and payroll tax reliefs when recruiting and upskilling apprentices. Ensure you plan for these available benefits:
Age 16–18 Incentive
All employers (both levy and non-levy) receive £1,000 for each apprentice hired aged 16–18, or 19–24 with care experience or an EHCP.
Paid at 90 days and 365 days.
SME Recruiting Payment
From 1 October 2026, non-levy employers will receive up to £2,000 for recruiting new apprentices aged 16 to 24.
Must join within past 3 months.
Level 2 Support
Specific funding allocations and support pathways are available for L2 foundation apprenticeships in construction, digital, health, and catering.
Supports early career progression.
National Insurance Savings
Employers are exempt from paying Employer National Insurance contributions for apprentices aged under 25 earning below £50,270.
Reduces overall employment overheads.
Key funding changes employers need to plan for
Compare current apprenticeship funding frameworks against the Growth and Skills Levy reforms. Use this roadmap to align your budgets:
| Funding Area | Current Position | What Is Changing | Employer Action |
|---|---|---|---|
| 10% Top-Up | A 10% government top-up is added monthly to funds entering DAS accounts. | From 1 August 2026, the 10% government top-up will stop for new funds entering apprenticeship service accounts. | Plan apprenticeship budgets assuming no top-up for funds entering from August 2026. |
| Levy Expiry | Levy funds expire 24 months after entering accounts if not used. | From 1 August 2026, new funds entering accounts expire after 12 months if unused. Funds entering accounts on or before 31 July 2026 continue to expire after 24 months. | Monitor account balance and plan training schedules to utilise new funds within 12 months. |
| Co-Investment (When Levy Runs Out) | Employers pay 5% co-investment toward additional costs, government pays 95%. | Where levy funds run out, employers pay 5% for starts up to and including 31 July 2026 and 25% for starts from 1 August 2026. | Budget for the increased co-investment contribution rate of 25% for new starts after July 2026. |
| Apprenticeship Units | Only full-length apprenticeships are funded. Shorter modules are not eligible. | Apprenticeship units are short, flexible training courses for people aged 19 and over who are already employed, lasting 30 to 140 delivery hours over 1 to 16 weeks. | Audit workforce skill gaps and prepare unit training plans starting from April 2026. |
| SME/Non-Levy Under-25 Support | 100% government funding for starts aged 16–18, or aged 19–21 in companies under 50 staff (otherwise standard 5% co-investment). | From the 2026 to 2027 academic year, apprenticeships will be fully funded for non-levy payers for under-25s. From October 2026, eligible non-levy employers may receive up to £2,000 when recruiting new apprentices aged 16 to 24, subject to the published conditions. | Plan hiring of young apprentices to take advantage of £0 training costs and recruitment incentives. |
| Level 7 Restrictions | All Level 7 (Master's level) programmes are eligible for funding regardless of learner age. | From 1 January 2026, Level 7 public funding is restricted to the published age and exception rules. | Review existing Level 7 starts (which remain funded) and adapt talent development routes for staff aged 22+. |
| Minimum Duration Flexibility | Apprenticeship programmes must last a minimum of 12 months. | The minimum duration was reduced from 12 to 8 months in August 2025 only where appropriate. | Consult with Solveway to assess if accelerated programmes apply to your experienced hires. |
How Solveway helps employers manage funding
Managing government systems, allocations, and compliance can be challenging. Solveway operates as your full-service educational partner, handling:
- Onboarding & Eligibility Audits (Verify levy status and cohort alignment)
- DAS Configuration & PAYE Linking (Ensure setup is error-free)
- Levy Transfers & Modular Planning (Facilitate transfers and unit curriculum)
Our specialised technical, data, finance, and AI apprenticeship routes are fully mapped against active standards, helping you maximise the business case (reducing recruitment overheads, improving workforce productivity, and driving internal staff retention).
92% Staff Retention
Investing in structured apprenticeships results in higher employee loyalty, helping you retain technical talent and protect intellectual capital.
Lower Recruitment Overheads
Train existing employees or recruit apprentices directly rather than paying expensive agency commissions for senior external hires.
Funding FAQs
Can I use levy funds for existing employees?
What happens if I run out of levy funds?
What are the co-investment rules for SMEs and non-levy employers?
What new support is available for SMEs recruiting young apprentices?
Do levy funds still get the 10% government top-up?
Are Level 7 (Master's) apprenticeships still funded?
Do funds expire?
Can I use funds to pay apprentice wages?
What is the off-the-job training requirement?
Latest funding review and official sources
Our team monitors government regulatory portals to ensure our curriculum and funding guides are completely aligned with primary guidelines.
Primary Monitored Source: DfE Growth and Skills Levy Page
Last reviewed: May 28, 2026
Important: funding depends on start date and eligibility
Funding rules depend on employer type, learner eligibility, start date, programme and funding route. Solveway confirms eligibility during onboarding.
Ready to Maximise Your Funding?
Whether you pay the levy or are an SME seeking 95% to 100% co-investment support, our team can help you build an optimised training programme.