Apprenticeship Funding Is Changing: What This Means for Employers

Apprenticeship Funding Is Changing: What This Means for Employers

From 2026, major changes to apprenticeship funding in the UK will affect how employers recruit and train staff. Designed to address skills shortages and align training with industry needs, these reforms impact both levy-paying and non-levy employers.

With new incentives alongside reduced funding and tighter deadlines, employers need to plan and make the most of available support.

Here’s what’s changing and what it means for your business.

Major Changes for Levy-Paying Employers

What’s changing:

1. Reduced expiry window for levy funds:

From August 2026, levy funds will expire after 12 months instead of the current 24 months.

What this means for employers:

This means employers must plan training more proactively or risk losing funds.

1. Removal of the 10% top-up.

The government will remove the current 10% top-up applied to levy contributions.

What this means for employers:

From August 2026, employers will need to cover any funding shortfall themselves.
Note: This change does not apply to funds already in accounts.

1. Reduced Government co-investment:

When levy funds are exhausted, government co-investment will decrease from 95% to 75%.

What this means for employers:

Employers will now need to contribute 25% of training costs, an increase that will require budgeting and planning.

Changes for Non-Levy Employers

For SMEs and some larger organisations, the system remains supportive with access to high levels of government funding and ongoing access to levy transfers. However, from October 2026, they will also have access to an added incentive.

What’s changing:

1. New £2,000 incentive

Eligible employers will receive a £2,000 payment for hiring apprentices aged 16–24. The payment is made after the apprentice has been in employment for 90 days.

What this means for employers:

This additional incentive provides employers with a stronger financial reason to recruit young apprentices, helping to reduce recruitment costs while investing in workforce development.

Need Support Navigating the Changes?

Despite the changes, apprenticeships remain a powerful tool for workforce development. In fact, for many employers, especially SMEs and some larger organisations, the system is becoming even more attractive thanks to new incentives and targeted support.

However, levy-paying employers will need to adapt quickly to:

• Shorter funding windows
• Reduced government contributions
• More proactive planning

Understanding apprenticeship funding can be complex, especially with new reforms coming into effect.

Here at DN Colleges Group, we’re here to help make sense of these changes to help maximise your opportunities when it comes to hiring an apprentice.

If you’re unsure about these changes or want to get started hiring an apprentice, get in touch with us today.

Read more about all the funding, incentives and national insurance relief for employers hiring an apprentice.

Find out how hiring an apprentice can help bridge the skills gap.