The headlines
- Apprenticeships now sit with the Department for Work and Pensions, not the DfE (machinery-of-government change, 1 April 2026).
- A new £2,000 hiring grant for non-levy employers taking on a 16 to 24 apprentice from 1 October 2026.
- Free training for under-25s at non-levy employers: government funds 100% of training and assessment.
- The proposed crackdown on subcontracting (an IR35-style definition, a £25,000 de minimis) has been stepped back for now, with a wider review over the summer.
- The 10% levy transfer top-up is removed from 1 August 2026.
The apprenticeship funding rules are the small print that decides who gets funded, for how much, and on what conditions. The 2026 to 2027 rules, which apply to apprenticeships starting between 1 August 2026 and 31 July 2027, are more significant than usual: they are the first set published after apprenticeships moved to a new government department, and they carry real money for employers hiring young people.
A draft was published on 22 April 2026 for feedback, with an updated version following. Here is what actually changed, split into what matters for employers and what matters for providers.
The dates that matter
The big one: apprenticeships now sit with the DWP
On 1 April 2026, responsibility for apprenticeships transferred from the Department for Education to the Department for Work and Pensions in a machinery-of-government change. The 2026 to 2027 rules are the first published under the DWP, and the language throughout has been updated to reflect it, including references to the Growth and Skills Levy (the successor to the Apprenticeship Levy). For employers and providers the day-to-day process is unchanged, but the department you are dealing with, and the strategic direction, now sits with the DWP.
What employers get: the money
This is where the 2026 to 2027 rules are genuinely good news, especially if you do not pay the levy.
A £2,000 hiring grant for young apprentices
From 1 October 2026, non-levy-paying employers can claim a £2,000 grant when they recruit a new apprentice aged 16 to 24, provided that apprentice started their job within the previous three months. It is paid in two instalments, with the first once the apprentice completes their first 90 days. If you are a smaller employer thinking about a young hire, this is real cash on top of funded training.
Free training for under-25s at smaller employers
For new starts from 1 August 2026, the co-investment rules change in favour of employers. (Co-investment is the share of the training cost an employer pays when government funding does not cover all of it.) The headline: if you do not pay the levy and your apprentice is aged 16 to 24 at the start of training, the government funds 100% of the training and assessment, up to the funding band maximum. Here is the full picture.
| Your situation (new starts from 1 Aug 2026) | What you pay |
|---|---|
| Levy payer with funds in your account | Covered from your levy |
| Levy payer, levy funds exhausted | 25% co-investment |
| Non-levy employer, apprentice aged 25 or over | 5% co-investment |
| Non-levy employer, apprentice aged 16 to 24 | Nothing: fully government funded |
One change that cuts the other way: the 10% top-up the government used to add to funds entering levy accounts is removed for new funds from 1 August 2026. And the long-standing sore point, that a levy payer whose funds run out pays 25% co-investment even for an under-25, has not been fixed; sector bodies are still pressing for relief there.
The biggest single change, in one view. For a non-levy employer taking on a 16 to 24-year-old:
| Non-levy employer hiring a 16 to 24-year-old | Before (2025/26) | From August 2026 |
|---|---|---|
| Training & assessment cost | 5% co-investment (you paid 5%) | £0, fully government funded |
| Hiring grant | None for most employers | £2,000 (from 1 October) |
| Your net position | Pay 5% of the bill | Free training, plus £2,000 in |
Smaller (non-levy) employers hiring under-25s. Free training plus a £2,000 grant makes a young apprentice cheaper to take on than at almost any point in recent memory. Levy payers still benefit, but should plan for the 25% co-investment if their funds run out. Providers, meanwhile, pick up a few more compliance watch-points (subcontracting, lawful wage).
See exactly what you would pay for a young hire under the new rules.
Book a free funding review →The apprenticeship must clearly fit the job
The rules strengthen the expectation that there is a clear and substantial link between the apprenticeship standard and the apprentice's main day-to-day role, such that the apprenticeship leads to genuine occupational competence. In plain terms: you cannot pick a standard that only loosely fits someone's job. Choose the route that matches what they actually do, which is exactly the conversation we have with every employer anyway.
What this looks like in practice
Three quick examples of how the 2026/27 rules play out.
You are a non-levy employer hiring a 19-year-old
From August the government funds 100% of their training and assessment, and from October you can claim a £2,000 hiring grant once they pass 90 days. Your out-of-pocket training cost is zero, and you are £2,000 better off.
You are a levy payer who usually runs out of funds mid-year
Once your levy account empties, new starts move to 25% co-investment. The apprenticeship still stacks up, but budget for that 25% on starts later in the year, or time starts to your monthly levy inflow so funded places land first.
You are considering your first apprentice
Start with a funding review. If your hire is 16 to 24 and you do not pay the levy, the training is free. We will check eligibility, pick a standard that genuinely fits the role, and handle the paperwork so you are not guessing.
What changed for delivery: providers
Subcontracting: a step back, for now
The draft rules proposed a noticeably tighter line on subcontracting: a revised, IR35-aligned definition of a "subcontractor" and "directly managed and controlled". (IR35 is the tax test for whether someone is genuinely self-employed or really an employee; aligning to it would have pulled many associates and freelancers into scope as subcontractors.) The draft also added a new £25,000 de minimis threshold. After significant sector feedback, the position has been stepped back for August: the current in-year approach continues, with a wider review of subcontracting over the summer and any changes expected from January 2027. If you use associates or specialist subcontractors, nothing changes immediately, but this is the area to watch.
Lawful wage, gateway and training plans
Three operational changes worth knowing:
- Lawful wage. Providers are expected to act where they are made aware an apprentice is not being paid a lawful wage. The intent is right, but a resulting non-completion can hit a provider's QAR (Qualification Achievement Rate, the headline completion-and-pass measure providers are judged on), which is largely outside the provider's control.
- "Gateway" becomes "gateway to completion". That is the point near the end where the employer, provider and apprentice confirm the apprentice is ready to finish and be assessed. Reflecting the assessment reforms, assessment can now take place across the programme rather than only at the end. This is the funding-rules counterpart to the changes we covered in our ST1512 v2.1 guide.
- Training plan sign-off. The training plan must now include a section for the employer, provider and apprentice to confirm the planned content has been delivered, which can be signed off at the final review. This aligns the main programme with the apprenticeship unit rules.
Other changes worth knowing
- Off-the-job minimum hours are now published per standard on the Skills England website rather than in an annex.
- Level 2 Administration Assistant (ST1472) funding is restricted to apprentices aged 16 to 24, the standard we recently asked employers about in our ST1472 market check.
- Self-employment is now an option for an apprentice being fully funded to completion after redundancy.
- Progress reviews must be no more than six months apart where an alternative timetable is agreed.
What is still being decided
We are not going to present this as fully settled. The 22 April version was a draft for feedback, with an updated version following. The subcontracting review runs over the summer with changes expected from January 2027, and the 25% co-investment issue for under-25s at levy payers whose funds run out is still being argued. We track these and will update as the position firms up.
What it means for you, and what to do
The right move depends on which kind of employer you are. Here is the short version.
If you are a non-levy employer hiring 16 to 24-year-olds
This is the best deal on the table. Plan a start that lets you stack free training with the £2,000 grant from October, choose a standard that genuinely matches the role, and get eligibility confirmed early so nothing slips.
If you are a levy payer
The maths still works. Forecast your levy balance for the year and budget for 25% co-investment on any starts after your funds run out, or time starts to your monthly levy inflow. Remember the 10% top-up is gone, so do not over-estimate your balance.
If you are unsure, or hiring your first apprentice
Start with a free funding review. We will confirm what you would actually pay (often nothing for an under-25), pick the right standard, and handle the paperwork.
Want us to map these rules against your current apprenticeship plans and show what you would pay? We handle the funding detail. The AI & Automation Practitioner Level 4 is fully levy-funded, with the new under-25 and non-levy rules applied for you.
Book a free funding review →Frequently asked questions.
Who publishes the apprenticeship funding rules now?
The Department for Work and Pensions (DWP). Responsibility for apprenticeships transferred from the Department for Education to the DWP in a machinery-of-government change on 1 April 2026, so the 2026 to 2027 rules are published and administered by the DWP.
When do the 2026 to 2027 apprenticeship funding rules apply?
They apply to apprenticeships starting between 1 August 2026 and 31 July 2027. A draft was published on 22 April 2026 for feedback, with an updated version following. You must follow the rules that applied on each apprentice's start date.
What is the £2,000 apprenticeship hiring grant?
From 1 October 2026, non-levy-paying employers can claim a £2,000 grant when they recruit a new apprentice aged 16 to 24, provided the apprentice started the job within the previous 3 months. It is paid in two instalments, with the first once the apprentice completes their first 90 days.
Is apprenticeship training free for under-25s at smaller employers?
For new starts from 1 August 2026, where the employer does not pay the levy and the apprentice is aged 16 to 24 at the start of training, the government funds all of the training and assessment costs up to the funding band maximum. For apprentices aged 25 or over at a non-levy employer, the co-investment rate is 5%.
What is changing with apprenticeship subcontracting?
The draft rules proposed a tighter, IR35-aligned definition of a subcontractor (which would have pulled many associates and freelancers into scope) and a new £25,000 de minimis threshold. After sector feedback, the position on subcontracting has been stepped back for August, with a wider review over the summer and any changes expected from January 2027.
What happens when a levy-paying employer runs out of levy funds?
For new starts from 1 August 2026, where a levy payer has insufficient funds in their apprenticeship service account, the employer co-investment rate is 25%. Sector bodies are still pressing for relief on this for under-25s, but no change has been confirmed.