Amidst plenty of uncertainty so far this year, there’s one thing we know – there are lots of changes coming up in the Growth and Skills levy. So what should employers prepare for, and what news are we still looking out for?
Increased flexibility - apprenticeship units
The government promised increased flexibility for levy payers in terms of what funds can be used for. We’ve already seen some opportunities for shorter duration apprenticeships, and the introduction of Foundation Apprenticeships. In February 2026, we expect further announcements on the latest part of the flexibility jigsaw – Apprenticeship Units – with delivery scheduled to begin in April.
For now, we know that these will be available in ‘critical skills areas’ such as digital and AI; that they will be delivered by approved apprenticeship training providers; and that the content will be drawn from existing apprenticeship programmes.
Reduced levy expiry period
From September 2026, we know that levy funds in employers’ accounts will expire after 12 months, rather than the two-year period that we’re used to. Precise details about how this will be implemented remain to be confirmed – we expect to see more on this in the draft 2026/27 funding rules, due in March.
No more levy top ups, and increased co-investment rate
From September 2026, the government will no longer top up the value of funds in levy payers’ accounts by 10%. The rate levy payers must contribute to the cost of apprenticeships once their own levy funds have been fully utilised will also increase from 5% to 25%. This includes small levy payers, who fall well within the typical definition of SMEs with fewer than 250 employees. Again, more details of these changes will be included in the draft funding roles for 2026/27, expected to be published in March.
For SMEs – fully funded apprenticeships for under 25s
The government have committed to rebalancing the apprenticeship system towards young people, and have recognised the vital role of SMEs in this. So, from September 2026, apprenticeships for young people aged under 25 will be fully funded for non levy paying employers.
The implications for levy transfer
Since we began supporting SMEs to create apprenticeships in 2020, the funds provided by our generous levy donors via the levy transfer facility have played a vital role in enabling SMEs to create high-quality and equitable opportunities. Our analysis suggests that this support will remain in high demand:
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Although apprenticeships for under 25s will be fully funded from September, we don’t anticipate an end to levy transfer requests for this age group – typically where they form part of a mixed-age cohort. The apprenticeship system is complex for SMEs to navigate, and securing a single funding source for their cohort makes this more manageable for many employers in this position. This is why we have seen continued requests for transfer funds for apprentices aged 21 and under, despite these having been eligible for full funding since September 2024 – in fact they’ve continued to make up c.20% of the apprenticeships our levy donors support via transfer.
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We anticipate a significant increase in requests for levy transfer from small levy payers, due to the increase in their co-investment rate from 5% to 25%. This change is unlikely to have a major impact on the relatively small number of very large companies who fully utilise their funds. But the position is very different for those who are just above the £3m annual salary threshold and therefore pay a small amount of levy – bearing in mind that, using the median UK salary as a guide, these are companies with only around 75 employees. They frequently utilise the small levy pot they have and will then be asked to pay five times as much as they are used to. For businesses in this category, levy transfer will make the difference between apprenticeships remaining viable and becoming unaffordable.
So if you are a levy paying employer with funds continually expiring – and with a greater sense of urgency from September – please do continue to make your funds available for transfer with our support. We’re confident that we’ll have plenty of grateful SMEs.
There's plenty more change coming, from assessmment reform to apprenticeship standard reviews. Here are some reliable sources of further information:
https://find-employer-schemes.education.gov.uk/interim/growth-and-skills-levy
https://feweek.co.uk/providers-must-join-official-register-to-offer-new-apprenticeship-units/