In England, the government pays most or all of the cost of apprenticeship training. Large employers with a pay bill over £3 million pay into the Growth and Skills Levy and spend it on training. Smaller employers pay nothing for apprentices aged 16 to 24 and just 5% for apprentices aged 25 and over. On top of that, you could get up to £8,000 in extra payments for hiring a young person.
Funding rules changed a lot in 2026. The Apprenticeship Levy became the Growth and Skills Levy, co-investment rates moved, and new incentives arrived from October. If you last looked at apprenticeship funding a couple of years ago, much of what you know is out of date.
This guide cuts through the jargon. You’ll find out:
- how funding works if you pay the levy
- how funding works if you don’t
- what extra payments you can claim
- what the funding covers (and what it doesn’t)
- what changed in 2026
Last updated: October 2026. Figures apply to apprenticeships starting in England between 1 August 2026 and 31 July 2027, under the GOV.UK apprenticeship funding rules.
Apprenticeship funding if you pay the levy
If your annual pay bill is over £3 million, you pay the Growth and Skills Levy at 0.5% of your total pay bill. It’s collected through PAYE, alongside tax and National Insurance.
That money lands in your apprenticeship service account each month, based on your pay bill in England. You then use it to pay a training provider for:
- apprenticeships, from Level 2 up to degree level
- foundation apprenticeships for young people
- apprenticeship units, the new short courses for existing staff
Use it or lose it: funds now expire faster
From 1 August 2026, new funds expire after 12 months if you don’t use them. It used to be 24 months. Funds already in your account before August 2026 keep the old 24-month expiry, and the oldest funds are always spent first.
The 10% government top-up that used to be added to levy payments has also stopped.
What happens when your levy runs out?
If you spend all your levy, you don’t have to stop. You move into co-investment, where you and the government share the cost:
| Apprentice’s age at start | You pay | Government pays |
|---|---|---|
| Under 25 | 0% | 100% |
| 25 and over | 25% | 75% |
For apprentices aged 25 and over who started on or before 31 July 2026, the old 5% rate still applies.
Example: a Customer Service Practitioner Level 2 apprenticeship has a £3,500 funding band. If your levy has run out and the apprentice is over 25, you pay £875 and the government pays £2,625.
Can you share your levy?
Yes. You can transfer up to 50% of your annual levy funds to other employers, such as smaller businesses in your supply chain or your local area. It’s a simple way to support your community and keep unspent funds working.
Apprenticeship funding if you don’t pay the levy
Most small and medium-sized businesses don’t pay the levy. If that’s you, the government funds your apprenticeship training directly. You just need an apprenticeship service account to reserve funds and pick a training provider.
| Apprentice’s age at start | You pay | Government pays |
|---|---|---|
| 16 to 24 | 0% | 100% |
| 25 and over | 5% | 95% |
So if you’re an SME hiring a 19-year-old onto a Level 3 apprenticeship, the training and assessment cost you nothing, up to the funding band maximum. Not sure where to start? Our apprenticeship recruitment team can find the right person for the role.
If you want to train an older employee, the 5% is usually a few hundred pounds. On a £3,500 funding band, that’s £175. You can often avoid it entirely through a levy transfer from a larger employer, so it’s worth asking your training provider.
Extra payments: up to £8,000 for hiring a young person
This is the part most employers miss. On top of free or discounted training, you can claim cash payments when you hire a young apprentice. You can claim more than one.
| Payment | Who can claim | Apprentice eligibility | How it’s paid |
|---|---|---|---|
| £1,000 hiring payment | All employers | 16 to 18, or under 25 with an EHC plan or a care leaver | 2 instalments, at day 90 and one year. Claimed by your training provider and passed to you |
| £2,000 apprenticeship hiring payment (new from 1 October 2026) | Non-levy employers only | New employees aged 16 to 24 | 2 instalments, at day 90 and day 365. Earliest payments from January 2027 |
| £2,000 foundation apprenticeship incentive | All employers | 16 to 21, or under 25 with an EHC plan, care leavers, prisoners and prison leavers | 3 instalments, the last when the apprentice progresses to their next apprenticeship |
| £3,000 Youth Jobs Grant | All employers | 18 to 24, unemployed and on Universal Credit for 6 months or more | £1,800 after 6 weeks, £1,200 after 18 weeks. Paid directly by DWP |
Don’t forget National Insurance. You pay no employer National Insurance on eligible earnings for apprentices under 25. It’s an ongoing saving for as long as they’re under 25.
What apprenticeship funding covers (and what it doesn’t)
Funding pays for training and end-point assessment, up to the funding band maximum set for each apprenticeship. Every apprenticeship has a band, from a few thousand pounds for Level 2 roles to much higher amounts for degree-level programmes. You can browse the programmes we deliver on our apprenticeships page.
Funding covers:
- training delivered by your provider
- the end-point assessment at the end of the apprenticeship
- English and maths qualifications, where needed
Funding doesn’t cover:
- the apprentice’s wages, which you pay as their employer
- costs above the funding band maximum
- 16 standards withdrawn from September 2026, including Team Leader Level 3, Operations Manager Level 5 and Chartered Manager Level 6 (you can still fund these privately)
- Level 7 apprenticeships for anyone aged 22 or over who started from 1 January 2026
Apprentices must also spend part of their paid working hours on off-the-job training. A good training provider will plan this around your business, not the other way round.
What changed in 2026?
The government is putting more money behind young people and critical skills, backed by £1 billion of extra investment. Here’s what changed and when.
| When | What changed |
|---|---|
| 1 October 2026 | New £2,000 hiring payment for non-levy employers taking on apprentices aged 16 to 24 |
| September 2026 | Funding withdrawn from 16 apprenticeship standards for new starts |
| 1 August 2026 | Non-levy employers pay 0% for apprentices under 25. Levy co-investment rises to 25% for over-25s. New levy funds expire after 12 months. 10% top-up stops |
| April 2026 | Apprenticeship Levy becomes the Growth and Skills Levy. Apprenticeship units launch, including three in AI leadership |
| 1 January 2026 | Level 7 funding limited to apprentices aged 16 to 21 (or under 25 with an EHC plan or care leavers) |
Two more changes make apprenticeships easier to run. Apprentices aged 19 and over no longer have to pass English and maths qualifications to complete. The minimum length of an apprenticeship also dropped from 12 months to 8 months, where that makes sense for the role.
Apprenticeship funding FAQs
Is apprenticeship training free for small businesses?
Yes, if your apprentice is aged 16 to 24 when they start. Non-levy employers pay 0% of training and assessment costs for this age group. For apprentices aged 25 and over, you pay 5%.
Do I have to pay the apprentice’s wages?
Yes. Apprenticeship funding covers training and assessment, not wages. You pay your apprentice at least the apprentice minimum wage. If they’re under 25, you pay no employer National Insurance.
Can I use apprenticeship funding for existing staff?
Yes. Apprenticeships aren’t just for new starters. You can upskill current employees, as long as the apprenticeship teaches them new skills. Apprenticeship units are also designed for existing staff aged 19 and over. Find out more about developing your team.
How much funding can an employer get for an apprentice?
Training is covered up to the funding band for that apprenticeship. On top of that, you could get up to £8,000 in extra payments for hiring an eligible young person.
Who claims the incentive payments?
Your training provider claims most payments and passes them on to you. The Youth Jobs Grant is the exception, because DWP pays it straight to employers.
What is the Growth and Skills Levy?
It’s the new name for the Apprenticeship Levy from April 2026. Levy funds can now pay for apprenticeships, foundation apprenticeships and short apprenticeship units.
Let We Are Zenith do the hard work
Funding rules are complicated. Using them shouldn’t be.
At We Are Zenith, we help North East employers recruit, develop and retain great people. When it comes to apprenticeships, we:
- check exactly what funding and payments you’re eligible for
- find and recruit the right apprentice for your business
- deliver the training, including AI and digital apprenticeships
- handle the paperwork and claim your incentive payments
- support your apprentice through to completion
Want to see what that looks like in practice? Read Will Towards’ story at Cascade Cash Management.
Whether you’re a small business hiring your first apprentice or a levy payer trying to spend your funds before they expire, we’ll help you get the most from every pound.
Ready to find out what your business could claim? Get in touch with our team for a free, no-pressure chat.
