With the beginning of April comes the planned changes to the established apprenticeship funding rules and the introduction of the Growth & Skills Levy. While not every change has been announced, the UK Government has been vocal about their plans for updating the current apprenticeship framework.
What is the Growth and Skills Levy?
The Growth and Skills Levy is a UK tax on large employers which is used to fund apprenticeship training. It is payable by all employers with an annual pay bill of more than £3 million, at a rate of 0.5% of their total. The levy is paid into a central digital apprenticeship service (DAS) that employers can access. Funding is available for both new and existing employees and the training must be delivered by an approved training provider.
This fund is a new version of the previously used Apprenticeship Levy. The aim of the new levy is to provide a more flexible offer to employers and learners. The Growth and Skills levy claims to help people learn new, relevant high-quality skills at work and fuel innovation in businesses across the country.
How is the Growth and Skills Levy different to the Apprenticeship Levy?
While the Growth and Skills Levy maintains some similarities to the Apprenticeship Levy, particularly in its cost and how it is paid, there are several key differences introduced.
Key Differences: Growth and Skills Levy vs. Apprenticeship Levy
- Flexibility & Scope: the new levy allows employers to fund shorter, targeted “modular” training courses to fill specific skill gaps, whereas the old levy was largely restricted to full, long-term apprenticeships.
- Training Options: the Growth & Skills Levy introduces “apprenticeship units” (30–140 hours), which allow for faster upskilling compared to the minimum 12-month requirement of the old system.
- Fund Expiry: funds will now expire in 12 months instead of the previous 24-month period, requiring faster utilisation.
- Level 7 Restrictions: from April 2026, levy funds cannot be used to fund new apprenticeships at Level 7 (master’s level) for individuals aged 22 and over.
- Foundation Apprenticeships: the new system introduces foundation apprenticeships designed to help younger workers start their careers.
- Co-investment: the government’s co-investment rate for training costs (when levy funds run out) changes to 25%, aiming to encourage more direct investment from businesses.
Growth and Skills Levy employer incentives
Hiring incentives were newly introduced to encourage employers to hire through the new Growth and Skills Levy. Employers in England are now offered up to £3,000 for hiring young talent aged 16-24 (if on Universal Credit) and £2,000 for SMEs taking on apprentices.
These incentives are added to the existing National Insurance Contribution (NIC) exemption that has been available since 2024. This exemption states that employers do not need to pay NIC for apprentices under the age of 25.
Why was the Growth and Skills levy introduced?
The changes to the apprenticeship framework were developed in response to the current skills shortage present in the UK workforce. Additionally, the UK Government has stated that it aims to help more young people enter the workforce, supported through the newly introduced foundation apprenticeships. The Growth and Skills levy also hopes to boost employer investment in vocational skills through greater flexibility and incentives.
LMP Education levy and recruitment support
LMP Education is an award-winning apprenticeship provider that offers a range of Growth and Skills levy support for organisations across a variety of sectors. Alongside our levy utilisation strategy support that we offer, we can also support your organisation through recruitment services helping you find the right candidate for your position. All our services are fully funded and at no cost to your organisation.
To learn more about how we can support your organisation, book a free levy audit consultation with the LMP team today!
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