Co-investment rose to 25% on 1 August. Your under-25s are exempt from it.

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.

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.

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.

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 aged 25 or over 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 hiring apprentices aged 16 to 24, whoever you are. This is the part most coverage got wrong. Government funds 100% of training and assessment up to the band maximum for 16 to 24 year olds, and that holds for non-levy employers and for levy payers whose accounts have run out. We cover the wider picture in our guide to the 2026/27 funding rules.

The planning move most employers are missing

Put the two rules side by side and a strategy falls out of them.

While your account has money in it, age makes no difference: everything comes out of the same pot. The moment it empties, age decides everything. Your young apprentices carry on fully funded and your over-25s start costing you a quarter of the band.

Which means the question is no longer "how do we avoid the 25%". It is "what is the age profile of the training still in flight when our account runs dry, and can we change it?" Two employers with identical levy income and identical headcount can end the year with wildly different bills purely on sequencing.

Three practical consequences:

• Front-load your over-25s. If you have senior or mid-career people you intend to train anyway, running them while the account still has funds costs you nothing extra. Leaving them until the pot is empty costs you 25%.
• Your under-25 pipeline is now cost-insulated. Once you accept the account will empty, additional 16 to 24 starts are effectively free to train, which changes the maths on recruiting young talent entirely.
• Forecasting is the whole game. You cannot sequence anything without knowing roughly which month the account runs dry. That is a spreadsheet exercise, not a strategy offsite, and almost nobody has done it.

We went through this arithmetic in more depth, including a worked illustration, in our piece on making your levy go furthest across both age groups.

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 now

The 31 July deadline has passed, so the lock-in route is closed for anything you did not already start. What is left is better anyway, because it is about sequencing rather than sprinting.

1. Work out the month your account runs dry. Take the current balance, add monthly levy income, subtract committed monthly payments across live cohorts. You want a date, not a feeling. Everything below depends on it.
2. Run your over-25s while there is still money in the pot. Training you were going to buy anyway costs nothing extra today and 25% of the band later. This is the single largest lever you have.
3. Treat under-25 starts as insulated. Once you know the account will empty, additional 16 to 24 year olds are fully funded either side of that date, so the usual budget objection to hiring young apprentices does not apply.
4. Do not let funds expire. Unused levy now expires after 12 months. Money that expires is money that pushes your run-dry date earlier and your over-25 training into the 25% band.
5. Check the other reliefs. Non-levy employers taking on 16 to 24 year olds also get the £2,000 hiring payment from October, and there is a bursary of up to £4,500 for eligible households.

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. The under-25 exemption is set out in the 2026 to 2027 apprenticeship funding rules. Confirm your own position against the current rules before you rely on any of this.

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).