This year the existing apprenticeship system has been reformed, introducing the new Growth and Skills levy. The new system offers a range of benefits for employers and apprentices alike, along with some new apprenticeship offerings. This article provides a complete guide to all the changes introduced in the reform.
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. These include:
- 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 products
Apprenticeships
Apprenticeships are funded training programmes that merge a full-time role with studying for a qualification. Apprenticeships enable individuals to earn while they learn, gaining valuable knowledge, skills and behaviours tailored to a specific job role.
As an employer, hiring an apprentice allows you to invest in the future by bringing in talent that fits your business needs.
Foundation apprenticeships
Foundation apprenticeships offer structured training in an entry level occupation (at level 2) designed for eligible 16- to 24-year-olds who are at the start of their career.
These apprenticeships offer a clear progression route, enabling individuals to gain relevant employability skills and experience that can lead to more specific or advanced apprenticeships. This structured pathway supports long-term career development and growth.
Apprenticeship units
Apprenticeship units offer employers short, flexible training courses that up-skill existing staff in critical skill areas.
These courses are designed to help employers respond quickly to evolving skills needs and invest in workforce development.
Apprenticeship units are for those aged 19 and over who are already employed. They last between 30 and 140 delivery hours and can be delivered over a period of 1 to 16 weeks.
Growth and Skills levy employer incentives
A main focus of the changes made to the existing apprenticeship framework has been to help more young people in entering the workforce. To support this, the DfE has introduced employer incentives for hiring apprentices:
- Youth hiring incentives: to encourage business to hire young people the DfE introduced a cash incentive of up to £3,000 is available for hiring young talent aged 16-24 (if on Universal Credit).
- SME support: non-levy paying employers can receive a £2,000 incentive for recruiting new apprentices aged 16–24, starting October 2026, payable after 90 days of employment.
- Foundation apprenticeship funding: employers can receive up to £2,000 to help with the costs of taking on a young person for a foundation apprenticeship and supporting their progression.
- Funding flexibility: levy-paying employers (annual bill >£3m) can transfer up to 50% of their annual funds to other businesses, and the government provides a 10% top-up to account funds.
- National Insurance exemption: the updated levy framework reiterated that employers are not required to pay National Insurance Contributions (NICs) for apprentices under 25.
- SME funding: smaller organisations (non-levy payers) benefit from 95% of training costs of apprenticeships being covered by the government.
About LMP Education
LMP Education is an award-winning apprenticeship training provider that offers a range of funded training solutions. We support organisations in upskilling their staff through apprenticeship training programmes, Growth & Skills Levy strategy, and fully funded recruitment services.
To learn more about how LMP Education can support your organisation book a free consultation call with our team!
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