Apprenticeship funding rules 2026 to 2027: what changed, and what it means

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 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. 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.

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 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 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" that would have pulled many associates and freelancers into scope, plus 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, which is largely outside the provider's control.
• "Gateway" becomes "gateway to completion". 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

If you are a smaller employer, the combination of free training for under-25s and a £2,000 hiring grant from October makes a young apprentice cheaper to take on than at any point in recent memory. If you are a levy payer, the maths still works, but plan for the 25% co-investment if your funds run low. Either way, the route only delivers if the standard genuinely fits the role.