Key takeaways
- From 1 August 2026, employer co-investment rises from 5% to 25%. The government share falls from 95% to 75%.
- It applies only when your levy funds run out, and only to new starts from 1 August. Starts up to 31 July keep the 5% rate.
- Worked example: a £23,000 band goes from £1,150 to £5,750, a 400% increase. A £9,000 band goes from £450 to £2,250.
- Business leaders have warned FE Week it will force cuts to recruitment, including of young jobseekers.
- Two ways out: start planned cohorts before 31 July, and stop letting levy funds expire, because co-investment only bites once the pot is empty.
There is a deadline coming that most employers have not costed. On 1 August 2026, the amount a levy-paying employer contributes towards apprenticeship training, once their levy funds are exhausted, rises from 5% to 25%. The government's share drops from 95% to 75%.
On the same apprenticeship, for the same training, you would pay five times more. Business leaders have told FE Week that the increase will force them to cut recruitment, including for young jobseekers, unless ministers rethink it. Whatever happens to that lobbying, the rule is currently live from 1 August, and it is worth understanding precisely who it affects.
What is actually changing
Co-investment is the slice of training and assessment cost you pay directly when government funding does not cover all of it. For a levy payer, it kicks in once the funds in your apprenticeship service account have run out.
| Apprenticeship start date | Employer pays | Government pays |
|---|---|---|
| Up to and including 31 July 2026 | 5% | 95% |
| From 1 August 2026 | 25% | 75% |
Source: apprenticeship funding rules and DfE guidance. The rate is fixed by the start date and runs for the duration of that apprenticeship.
What it costs in real money
Percentages hide the impact, so here it is in pounds, using two published examples.
- A £9,000 funding band: your contribution rises from £450 to £2,250 (DfE's own worked example).
- A £23,000 funding band, such as a Level 3 installation and maintenance electrician: from £1,150 to £5,750 over the apprenticeship, a 400% increase, per FE Week's reporting.
Multiply that across a cohort and it stops being a rounding error. Ten apprentices on a £23,000 band is the difference between roughly £11,500 and £57,500 of employer contribution.
Key takeaway: this is not a small administrative tweak. For any employer whose training demand outstrips their levy inflow, it is a material budget line appearing from August.
Who it hits, and who it does not
This is the part worth getting right, because the change is narrower than the headline suggests.
You are affected if
- You pay the levy, and your apprenticeship service account runs dry, and you start apprentices from 1 August 2026.
- You are a non-levy employer taking on apprentices aged 25 or over, where a co-investment share applies.
You are not affected if
- Your levy funds cover your training. If the pot does not run out, there is no co-investment to pay.
- Your apprentices started on or before 31 July 2026. They keep the 5% rate for the duration.
- You are a non-levy employer hiring under-25s. From August the government funds 100% of training and assessment, so your co-investment is nil. We cover the wider picture in our guide to the 2026/27 funding rules.
Why this lands at an awkward moment
The timing is what makes this sting. Two other changes arrive the same month, and they interact.
From August, unused levy funds expire after 12 months instead of 24, and the 10% government top-up ends. So the window to spend your levy halves at exactly the moment that overspending it becomes five times more expensive. If you run out of funds, you now pay 25%; if you fail to use them, they disappear faster.
That combination is why we argued that 2026/27 is the high-water mark for apprenticeship funding, and it is sharper still given that 54.2% of levy payers used a quarter or less of the funds entering their account. Most employers are not close to exhausting their levy. For them, the honest answer is that this change may never touch them, and the bigger risk is still expiry, not co-investment.
What to do before 1 August
- Check your account, not your assumptions. Look at what is actually in your apprenticeship service account and what enters it monthly. That tells you whether 25% is a real risk or a theoretical one.
- Start planned cohorts before 31 July. If a programme is going ahead anyway, a start date on or before 31 July locks in the 5% rate for its whole duration. That is a genuine, legitimate saving.
- Use the levy you already have. Co-investment only applies when the pot is empty, and unused funds now expire in 12 months. Spending your own funds is the cheapest training you will ever buy.
- Check for fully funded routes. Under-25s at non-levy employers are fully funded from August, and there is a £2,000 hiring payment from October.
If you are planning AI training this year, a start before 31 July keeps you on the 5% rate. We will check your levy position and tell you honestly whether the change affects you at all. The AI & Automation Practitioner Level 4 is levy-funded and needs no coding to start.
Book a short levy review →Rates and dates are as set out in the published apprenticeship funding rules at the time of writing. The £23,000 worked example and the employer warnings are from FE Week's reporting of 16 July 2026; the £9,000 example is DfE's own. Sector bodies are lobbying for a rethink, so confirm the current position before you rely on it.
Frequently asked questions.
What is apprenticeship co-investment?
Co-investment is the share of apprenticeship training and assessment costs an employer pays directly when government funding does not cover the whole cost. For a levy-paying employer it applies once the funds in their apprenticeship service account have run out. Until 31 July 2026 the employer share is 5% and the government pays 95%. From 1 August 2026 the employer share rises to 25% and the government pays 75%.
How much more will the 25% co-investment rate cost?
Five times more on the same apprenticeship. On a £9,000 funding band the employer contribution rises from £450 to £2,250. On a £23,000 band, such as a Level 3 installation and maintenance electrician, it rises from £1,150 to £5,750 over the apprenticeship, a 400% increase.
Who does the co-investment increase affect?
Only employers who exhaust their levy funds. If your apprenticeship service account still covers your training costs, you pay nothing extra. It bites hardest on levy payers with large training programmes relative to their levy inflow, particularly now that unused funds expire after 12 months rather than 24 from August 2026.
Does the 25% rate apply to existing apprentices?
No. The rate is set by the apprenticeship start date. Starts up to and including 31 July 2026 keep the 5% co-investment rate for the duration of that apprenticeship. The 25% rate applies to starts from 1 August 2026 onwards.
Do small employers pay the 25% co-investment rate?
Not for young apprentices. From August 2026 the government funds 100% of training and assessment for apprentices aged 16 to 24 at non-levy-paying employers, so there is no co-investment to pay at all. Non-levy employers taking on apprentices aged 25 and over do face a co-investment share.
How can employers avoid the co-investment increase?
Three practical steps. Start planned cohorts on or before 31 July 2026 to lock in the 5% rate. Use the levy funds entering your account each month rather than letting them expire, since co-investment only applies once your funds run out. And check whether your hires qualify for fully funded routes, such as under-25s at non-levy employers.
Sources
Apprenticeship funding rules and DfE guidance (GOV.UK). Employer reaction and the £23,000 worked example: FE Week, Co-investment cost hike 'will turn firms off apprenticeships' (16 July 2026).