Apprenticeship Levy Changes 2026: What Employers Need to Know

Significant changes to the Apprenticeship Levy came into effect on 1 August 2026, introducing greater flexibility in how businesses can fund employee training, alongside important changes to funding rules.

The introduction of the Growth and Skills Levy provides employers with more opportunities to invest in workforce development, including shorter, targeted training programmes. However, changes to government contributions and funding expiry periods mean businesses will need to plan more carefully to make the most of the support available.

For small and medium-sized enterprises (SMEs), understanding the new rules could help reduce training costs, address skills shortages and support long-term business growth.

What Has Changed Under the Growth and Skills Levy?

One of the biggest developments is the expansion of the types of training that can be funded through employers' levy accounts.

Previously, levy funding was primarily restricted to traditional apprenticeship programmes. Under the new arrangements, employers have greater flexibility to invest in approved training that meets their workforce needs.

Eligible training now includes:

• Full apprenticeships: Established programmes combining practical workplace experience with structured learning.

• Foundation apprenticeships: Programmes designed to help individuals develop essential skills and enter employment.

• Approved apprenticeship units: Shorter, focused training programmes that allow employees to develop specific skills without completing a full apprenticeship.
  

These changes offer businesses more options to upskill existing employees, tackle skills gaps and respond to changing industry demands.

However, greater flexibility comes alongside changes to how funding is allocated and spent.

Government Removes the 10% Levy Top-Up

From 1 August 2026, the government removed the additional 10% top-up previously applied to funds entering employers' apprenticeship service accounts.

This means levy-paying businesses now have less funding available to spend on eligible training than they would have received under the previous system.

For employers relying on levy funds to support ongoing apprenticeship programmes, this could require adjustments to training budgets and future recruitment plans.

Levy Funds Now Expire After 12 Months

Another significant change is the reduction in the amount of time employers have to use their levy funds.

Previously, funds remained available for 24 months before expiring. Under the new rules:

• Funds entering accounts from 1 August 2026 expire after 12 months.

• Funds added before 1 August 2026 retain the previous 24-month expiry period.
  

This shorter timeframe makes forward planning particularly important.

Businesses that delay recruitment or training decisions may find that unused funds expire before they can be allocated.

Regularly reviewing apprenticeship service account balances and developing a clear training plan can help employers maximise the value of their available funding.

Changes to Employer Contributions

The government has also introduced changes to co-investment arrangements for levy-paying employers who have exhausted their available funds.

The amount employers must contribute now depends on the age of the apprentice.

Apprentice age	Government contribution	Employer contribution
16–24	100%	0%
25 and over	75%	25%

These contributions apply to eligible training costs, subject to the relevant apprenticeship funding band limits.

For businesses employing apprentices aged 25 and over, the increased contribution requirement could result in higher training costs.

Employers should factor these changes into workforce development budgets, particularly when planning apprenticeships for existing employees.

Who Still Needs to Pay the Apprenticeship Levy?

Although the funding system has changed, the underlying Apprenticeship Levy calculation remains the same.

Employers with an annual pay bill exceeding £3 million are generally required to pay the levy, calculated at:

0.5% of their annual pay bill, less a £15,000 annual allowance.

The levy is collected through PAYE and applies across the private, public and voluntary sectors.

Connected companies and charities must consider the relevant rules for calculating their combined pay bill and sharing the levy allowance.

In England, levy-paying employers access their available training funds through an apprenticeship service account, with funding calculated according to the levy paid and the proportion of employees living in England.

What Support Is Available for SMEs That Don't Pay the Levy?

Businesses that fall below the Apprenticeship Levy threshold can still benefit from government funding to support apprenticeship training.

From August 2026, non-levy-paying employers can access the following support:

Apprentice age	Government funding	Employer contribution
16–24	100%	0%
25 and over	95%	5%

Funding is subject to eligibility requirements and the relevant apprenticeship funding band limits.

In addition, eligible non-levy-paying employers may qualify for a hiring incentive of up to £2,000 when recruiting a new apprentice aged 16 to 24 from October 2026.

For smaller businesses looking to recruit and develop new talent, these incentives could make apprenticeships a more affordable option.

What Can Apprenticeship Levy Funds Be Used For?

Levy funding can support a range of approved training and assessment costs, including eligible apprenticeship programmes, associated qualifications and relevant English and maths provision.

However, there are restrictions on how the money can be spent.

Funds generally cannot be used to cover:

• Employee wages or salaries.

• Recruitment and advertising costs.

• Travel and accommodation expenses.

• General business overheads.

• Equipment required for normal day-to-day duties.
  

Any training costs exceeding the relevant government funding band maximum must also be paid directly by the employer.

Understanding these restrictions can help businesses budget accurately and avoid unexpected costs.

Levy Transfers Could Provide Additional Opportunities for SMEs

Another option available to smaller businesses is the apprenticeship levy transfer scheme.

Under the arrangements, larger levy-paying employers can transfer up to 50% of their previous year's levy funds to other eligible organisations.

This could include smaller businesses within their supply chains, local employers or organisations operating in their communities.

For SMEs, receiving transferred levy funds could provide access to training that might otherwise place additional pressure on business finances.

It also creates opportunities for larger employers to support skills development across their wider business networks.

Planning Ahead for the New Funding Rules

The changes to the Apprenticeship Levy create both opportunities and challenges for UK employers.

While the Growth and Skills Levy offers greater flexibility to invest in workforce development, reduced funding periods and changes to employer contributions mean businesses need to take a more proactive approach.

Reviewing existing apprenticeship arrangements, identifying future training needs and understanding the financial implications of the new rules can help employers make better use of available support.

Need Advice on the Financial Impact of the Apprenticeship Levy?

Whether your business pays the Apprenticeship Levy or is looking to take advantage of government-funded apprenticeship training, understanding the financial implications is essential.

At SJC, Chartered Accountants, we can help businesses understand their Apprenticeship Levy obligations, assess the impact on payroll costs and plan effectively for future investment in their workforce.

For advice on how the changes could affect your business, get in touch with our team today.