What Employers Should Know About Apprenticeship Funding
Apprenticeships remain a key part of the UK’s skills strategy and are an increasingly important tool for employers looking to build a capable, future-ready workforce. As skills shortages continue across many sectors, apprenticeships offer a practical way to develop talent, improve retention, and support long-term growth. However, the rules around apprenticeship funding can be difficult to navigate, particularly as changes come into force for 2025 and beyond.
Understanding apprenticeship funding UK 2025 is essential for employers of all sizes. With updates to levy arrangements, new flexibilities under the Growth and Skills Levy, and adjustments to programme structures, employers need clear information to ensure they remain compliant while making the most of available funding.
This guide explains how apprenticeship funding works, outlines the apprenticeship funding rules 2025–26, and provides practical advice on how employers can maximise the benefits of investing in apprenticeships.
What Is the Apprenticeship Levy?
The apprenticeship levy was introduced to increase employer investment in skills and create sustainable funding for apprenticeship training. It applies to larger employers and plays a central role in how apprenticeship funding for employers is distributed.
Who Pays the Levy?
Employers with an annual pay bill of more than £3 million are required to pay the apprenticeship levy. The levy is set at 0.5% of an employer’s total pay bill, with an annual allowance of £15,000 to offset the cost. This means that only the portion of the pay bill above £3 million is effectively subject to the levy.
How the Levy Is Collected
The levy is collected monthly through PAYE and automatically credited to an employer’s digital apprenticeship service (DAS) account. Employers can then use these funds to pay for approved apprenticeship training and end-point assessment. Levy funds are topped up by the government by an additional 10%, increasing their overall value.
Transition to the Growth and Skills Levy
From 2025, the government is moving towards the Growth and Skills Levy. While apprenticeships remain a priority, this updated approach gives employers more flexibility in how levy funds are used. In addition to full apprenticeship programmes, employers can use a proportion of funds for shorter courses, modular training, and targeted upskilling that supports productivity and business growth.
Funding Apprenticeship Training: An Overview
Understanding how apprenticeship funding is applied in practice helps employers plan more effectively.
Use of Levy Funds
Levy funds can be used to pay for apprenticeship training and assessment delivered by approved providers. This includes the cost of end-point assessment and funding off-the-job training, which must make up at least 20% of an apprentice’s paid working hours. Funds cannot be used for wages, travel, or general employment costs.
Employer Co-Investment
Employers who do not pay the levy still receive significant support through the employer apprenticeship co-investment model. Under this arrangement, the government covers 95% of the apprenticeship training costs, with the employer contributing the remaining 5%. This makes apprenticeships accessible and affordable for small and medium-sized businesses.
Funding Bands and Limits
Each apprenticeship standard is allocated a funding band, which sets the maximum amount the government will contribute towards training and assessment. Employers are free to choose any approved provider, but if training costs exceed the funding band, the employer must pay the difference.
Key Changes in Apprenticeship Funding for 2025–26
Several important apprenticeship funding changes 2025–26 are designed to increase flexibility and employer engagement.
Reduced Minimum Duration
For selected standards, the minimum apprenticeship duration has been reduced from 12 months to 8 months. This allows employers to address skills gaps more quickly while maintaining robust training and assessment requirements.
Foundation Apprenticeships
Foundation apprenticeships are being introduced to support young people entering the workforce. These programmes focus on core employability and sector-specific skills and are supported by government apprenticeship incentives for employers who take on younger learners.
Greater Flexibility in Levy Use
The Growth and Skills Levy introduces new flexibility, allowing levy funds to be used for shorter training programmes and upskilling initiatives. This enables employers to design training pathways that combine apprenticeships with other forms of funded learning.
Restrictions on Level 7 Funding
From January 2026, new funding restrictions will apply to Level 7 apprenticeships. While existing learners will continue to receive funding, employers planning senior leadership or master’s-level apprenticeships should review eligibility carefully and consider alternative options where needed.
What Apprenticeship Costs Employers Should Plan For
While apprenticeship funding covers a significant proportion of training costs, employers should budget for additional expenses.
Costs Covered by Funding
Government funding covers apprenticeship training, assessment, learning materials linked to the standard, and off-the-job training delivery.
Costs Not Covered
Employers remain responsible for apprentice wages, recruitment and advertising costs, management time, equipment, and any training costs above the funding band.
Avoiding Fund Expiry
Levy funds expire after 24 months if unused. Employers should regularly review their digital apprenticeship accounts and plan training activity to ensure funds are not lost.
Maximising Your Apprenticeship Funding
Strategic use of apprenticeship funding can deliver long-term value.
Workforce Planning
Employers should align apprenticeship programmes with workforce planning, succession strategies, and future skills needs to maximise impact.
Supporting Growth and Productivity
Apprenticeships can be used to upskill existing staff, develop leaders, and support business transformation, not just entry-level recruitment.
Choosing the Right Provider
Working with experienced apprenticeship providers helps ensure compliance, quality delivery, and efficient use of funds, while reducing administrative burden.
Employer Incentives and Support Schemes
Several government apprenticeship incentives remain available in 2025.
National Insurance Relief
Employers do not pay Class 1 National Insurance contributions for apprentices under the age of 25, providing a valuable cost saving.
Incentives for Young Apprentices and Care Leavers
Additional payments are available for employers supporting apprentices aged 16–18, and for eligible care leavers aged up to 24.
Other Support
Employers may also benefit from sector-based funding, local skills initiatives, and government-backed training programmes aligned with national priorities.
Frequently Asked Questions
Levy funds can only be used for training and assessment, not wages. Apprenticeships can be used for existing employees where substantial new skills are gained. Compliance requires use of approved providers, accurate records, and meeting off-the-job training requirements.
Conclusion
Apprenticeship funding remains one of the most effective ways for employers to invest in skills, but the system continues to evolve. With the introduction of the Growth and Skills Levy and changes to apprenticeship funding rules for 2025–26, employers must stay informed and plan carefully.
If you are unsure about any aspect of apprenticeship funding, levy use, or how upcoming changes may affect your organisation, speaking to a trusted expert can help. The Colleges Partnership works closely with employers to provide clear guidance, practical support, and tailored apprenticeship solutions, helping organisations remain compliant while making the most of available funding.
Now is the time to review your apprenticeship strategy, understand your funding position, and ensure your investment in skills supports both immediate needs and long-term growth. Get in touch with our team for support.