Apprenticeship Levy and Funding

The Apprenticeship Levy is paid by UK employers with an annual wage bill above £3 million at a rate of 0.5% of the wage bill, minus a £15,000 allowance. Levy funds are held in a digital apprenticeship service account on GOV.UK and expire after 24 months if unused. Levy-paying employers can use their account to pay for apprenticeship training from approved providers.

Employers with connected companies (such as group structures) share a single £15,000 allowance and must apportion it. Levy-paying employers can also transfer up to 50% of their unused levy funds to other employers in their supply chain, enabling smaller businesses to access levy funding they would not otherwise generate. This levy transfer mechanism is increasingly used by large companies to support their suppliers and communities.

Employers with a wage bill below £3 million do not pay the Apprenticeship Levy. Instead, they access government co-investment: the government pays 95% of apprenticeship training and assessment costs, with the employer contributing 5%. This is managed through the apprenticeship service account that all employers must register on.

Small employers with fewer than 50 employees who take on apprentices aged 16–18, those under 25 who were previously looked-after children, or those with an education, health and care (EHC) plan pay nothing — government funds 100% of training costs. Additionally, employers receive a £1,000 incentive payment for hiring apprentices aged 16–18 or those meeting the care criteria above. This payment is made directly to the employer through their apprenticeship service account.

Apprenticeships are structured around approved standards, developed by employer groups (Trailblazer groups) for specific occupations. Over 600 standards are available, covering roles from software developer and chartered accountant to butcher and healthcare support worker. Each standard has a funding band (maximum government contribution per apprentice), ranging from £1,500 to £27,000.

To start an apprenticeship, employers choose a training provider from the Register of Apprenticeship Training Providers (ROATP) on GOV.UK. Providers include further education colleges, independent training providers, and universities. The provider handles much of the compliance and off-the-job training administration. The Find apprenticeship training tool on GOV.UK helps employers find providers offering specific standards in their area.

The Apprenticeship Levy has faced significant criticism since its introduction in 2017. Large levy-paying employers have accumulated substantial unspent balances — funds that expire after 24 months if unused — while smaller non-levy employers find co-investment requirements a barrier. The government has responded with a programme of reforms culminating in the transition to the Growth and Skills Levy.

Under the planned Growth and Skills Levy, which the government has been consulting on and developing since 2024, employers will have more flexibility in how they spend levy funds — not just on apprenticeships meeting the current regulatory definition, but potentially on a broader range of accredited training and skills development activities. The intention is to allow levy funds to be used for shorter, modular training programmes and industry-recognised qualifications in addition to full apprenticeship standards. The specific rules, thresholds, and eligible programmes for the Growth and Skills Levy are subject to ongoing policy development and should be confirmed against the latest government guidance before planning your training budget.

For current levy-paying employers, the key practical changes to be aware of include: the ongoing ability to transfer up to 50% of unspent levy funds to other employers in your supply chain or community (a powerful way to support smaller suppliers without losing your levy balance to expiry); the continued availability of degree apprenticeship standards (Level 6 and 7), which allow employers to fund undergraduate and postgraduate professional qualifications for existing employees; and the requirement to use an approved training provider on the Register of Apprenticeship Training Providers for all levy-funded training.

Non-levy employers should note that the government has periodically changed the co-investment rate — the proportion that small employers must contribute. Currently 5% for most employers, this rate has been zero in the past and may change again. Monitoring DfE apprenticeship funding rules updates (published annually) is essential for HR and finance teams planning training budgets. The Apprenticeship Service portal provides real-time visibility of your levy balance, committed spend, and available funds, and allows direct management of apprenticeship agreements with providers.