The Levy: FAQs
What is the Apprenticeship Levy and how is it changing?
The Apprenticeship Levy is a mandatory tax introduced in 2017 to ensure sustainable funding for high-quality training across the UK. It is paid by employers with an annual pay bill exceeding £3 million at a rate of 0.5% of their total pay bill. These funds are held in digital accounts to pay for apprenticeship training and assessment.
Starting in 2026, the system is undergoing significant transformation in a decade as it transitions into the Growth and Skills Levy. This new model is designed to be more flexible, shifting focus toward young people and immediate industrial skills needs.
Oversight of the levy and the approval of standards have moved from the Institute for Apprenticeships and Technical Education (IfATE) to a new body called Skills England.
We have detailed the changes further in our blog post ‘Skills and Growth Reforms explained’
Can we still employ apprentices if the course is no longer funded by the levy?
Yes, you can still employ apprentices if a course is no longer funded by the levy, but the financial responsibility for their training and assessment will shift to your organisation.
This does not apply to apprentices already enrolled. The government has confirmed that all existing learners will continue to be funded through to the completion of their apprenticeship.
How does levy gifting / transfer work and how is it changing?
Large employers (those with a pay bill over £3 million) can transfer up to 50% of their annual levy funds to other organisations such as smaller businesses (non-levy payers), charities, or flexi-job agencies to help meet local or sector-specific skills needs.
However, from Aug 2026, the government will fully fund apprenticeship training for under-25s at non-levy-paying SMEs. These organisations will no longer need to rely on levy transfers to employ apprentices.
If your business previously promised to "gift" levy funds to SMEs as part of a social value commitment. We would advise large employers to review their social value offer and limit commitments around levy transfers.
What happens to unused levy funds?
Currently, funds in your apprenticeship service account expire after 24 months on a rolling basis. However, as part of the 2026 reforms, this window is getting much tighter:
Old Funds (Before 1 August 2026): Any funds that were already in your account before this date will keep their original 24-month expiry period.
New Funds (From 1 August 2026): Any new money entering your account will expire after just 12 months if it isn’t used.
The "First In, First Out" Rule: When you pay for training, the system automatically uses the oldest funds in your account first to help you avoid losing them.
Where do the "expired" levy funds go?
Many large employers do not use all of their levy funds. The government uses that "surplus" to pay for training and assessment costs for non-levy paying employers (typically smaller businesses and SMEs).
If there is still money left over in the overall national apprenticeship budget at the end of the financial year—after both large and small employers have had their training paid for—that remaining amount is returned to the Treasury. For context, in the 2023/24 financial year, this was a very small amount, roughly 0.6% of the total budget.
How do I manage my levy funds under the new "Growth and Skills Levy"?
The way your account works will change significantly on 1 August 2026:
Budget for a smaller "top-up": The 10% government top-up to your account will stop.
Use it or lose it: New funds will now expire after 12 months instead of 24.
Watch for co-investment hikes: If you exhaust your levy funds, the amount you must pay toward extra training (co-investment) will jump from 5% to 25% for any new starts.
