Growth and Skills Levy
Everything you need to know about the Growth and Skills Levy in England, including consolidated 2025/26 updates from UK Government and incentives for hiring apprentices.
Growth and Skills Levy
Apprenticeships are a long-term investment in an employee and are great for boosting retention and supporting employees to upskill for new and emerging roles within your business. In England, apprenticeship funding is primarily managed through the Growth and Skills Levy, which replaced the Apprenticeship Levy in the 2025/26 academic funding year.
What the Growth and Skills Levy funds
The Growth and Skills Levy can be used by employers to fund Apprenticeships published and maintained by Skills England.
Starting in April 2026, the Levy will also be able to fund “Apprenticeship Units”, short, flexible training courses in high-growth areas such as Digital and Engineering. The exact details of what the units will be available and what they will look like are not yet available.
As of 2025/26 academic year, Level 7 Apprenticeships can only be funded for under 22s.
Additionally, the following changes to the Levy were announced in 2025/26:
- Shorter Apprenticeships: Minimum duration reduced from 12 to 8 months to better support employer needs.
- Flexible English & Maths: Older apprentices (over 19) may not require these if unnecessary for the role.
- New Short Courses: For quicker skills gap filling.
Levy-Paying Employers
Businesses with an annual pay bill of over £3 million pay 0.5% of their total pay bill into a digital levy account. These funds can only be used to pay for apprenticeship training and assessment. Funds in this account expire after 12 months if unspent.
Non-Levy Paying Employers
Businesses with a pay bill under £3 million can still access funding from the Growth and Skills Levy. However, the proportion of funding that they can access depends on the following factors:
- For apprentices aged 16-21 (or 22-24 with an Education, Health and Care plan or who have been in care), the government funds 100% of the training costs.
- For apprentices aged 22 and over, the employer pays just 5% of the training cost, with the government funding the remaining 95%.
- For Small Businesses (under 50 employees), the government funds 100% of the training costs regardless of the age and circumstances of the apprentice.
Levy Transfer
Levy-paying employers can transfer up to 50% of their unspent funds to other businesses. This was was increased from 25% in April 2024 to help larger businesses support their supply chains and SMEs.
Incentives for hiring an apprentice
Young Apprentice Incentive
If you hire a young apprentice, you will be entitled to a payment of £1,000, regardless of the size of your business. The incentive applies to the following apprentices:
- Aged 16 to 18.
- Aged 19 to 24 who has an Education, Health and Care (EHC) plan or has been in the care of their local authority.
The incentive is paid by the UK Government in two equal instalments of £500; the first arriving after 3 months and the second after 12 months.
The incentive will be paid to you by your training provider.
Foundation Apprenticeship Incentive
If you place a young apprentice on a Level 2 Apprenticeship you could be entitled to receive an incentive payment of up to £2,000 as follows:
- £1,334 for a young person aged 16 to 21 on a Level 2 Apprenticeship
- An additional £666 Progression Payment if the apprentice moves from a Foundation Apprenticeship to a higher-level apprenticeship within 6 months of completion.
This incentive is paid to you automatically by the UK Government via the Apprenticeship Service (AS) portal.
You will receive £667 payment after 90 days, a second instalment of £667 after 242 days, and a third and final instalment of £666 upon the apprentice’s progression to a higher level apprenticeship.
National Insurance (NI) Savings
You do not have to pay Class 1 Employer National Insurance contributions for any apprentice aged under 25, provided they earn less than the Upper Secondary Threshold (approx. £50,270 per year).
This can save a business roughly £1,000–£2,000 per year per apprentice, depending on their salary.
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