Growth and Skills Levy 2026: What's Changed & How It Affects Your Training Budget

On 1 April 2026, the Apprenticeship Levy is being renamed and redesigned. The government is calling it the Growth and Skills Levy, and alongside the name change comes a fundamental shift in how employers can use the money and how quickly they need to spend it.

If your annual pay bill exceeds £3 million, this matters to you. The new rules affect your training budget, your flexibility, and your options for upskilling your workforce. This guide explains exactly what's changing and why it matters.

Five Key Changes You Need to Know About

The Growth and Skills Levy retains the core mechanism of the old levy — 0.5% of payroll over £3m, drawn monthly into your Digital Apprenticeship Service account. But how you spend it, and how long you have to spend it, has changed significantly.

1. Apprenticeship Units: Short Skills Training Now Levy-Eligible

The biggest change is the introduction of "apprenticeship units" — short, intensive training modules lasting between 30 and 140 hours. That's as little as a single week of full-time training.

These units are now eligible for levy funding, provided your training provider has had them approved as discrete components of larger apprenticeship standards. Units are available in:

• Digital: Cloud computing, cybersecurity, data fundamentals, digital marketing, and software development
• AI: AI fundamentals, machine learning, large language models, prompt engineering, and generative AI implementation
• Engineering: Advanced manufacturing, electric vehicle technology, renewable energy systems, and digital engineering

The critical detail: you can use up to 50% of your annual levy pot for units, with the remaining 50% reserved for traditional full apprenticeships. This means if your levy generates £30,000 annually, £15,000 can fund units (multiple short courses) and £15,000 must go to full apprenticeships.

Units deliver government-recognised qualifications. They're perfect for addressing urgent skills gaps — training your team in a new technology before committing to a full 18-month apprenticeship. Think: AI implementation training for your operations team, cybersecurity essentials for your finance function, or cloud migration skills for your IT department.

2. Levy Expiry Shortened from 24 to 12 Months

This is critical. Previously, levy funds remained in your account for 24 months. From April 2026, that window closes in 12 months.

Money you accrue in April 2026 expires in April 2027. Funds you don't commit to training by then simply vanish.

Why does this matter? It forces more deliberate planning. If your payroll is £5 million, you're accruing roughly £2,500 monthly in levy funding — £30,000 annually. Under the old rules, you had two years to deploy it. Now you have one.

For large employers with payrolls over £10m, the impact is sharper: you're looking at £50,000+ in annual levy that must be committed within 12 months or lost forever.

3. The 10% Automatic Top-Up Is Gone

The old rules included a hidden benefit: if you didn't use your full levy in the first 12 months, the government automatically topped up your account by 10% to give you extra runway.

That's ending. If you don't use it, you lose it. The automatic safety net is gone.

This combined with the 12-month expiry means discipline in planning is now essential. Identify your training priorities in Q1 each year and commit funds by Q4 at the latest.

4. Co-Investment Rising from 5% to 25% When Levy Runs Out

For most apprenticeships, the government funds the bulk of training costs. The co-investment model splits the cost between government and employer.

Previously, when your levy pot was empty, the government still covered 95% of training costs, and you paid 5%. This made it affordable to continue apprenticeships even without levy funds.

From April 2026, that changes. When your levy is exhausted, the co-investment rate becomes 75% government, 25% employer. You pay a quarter of the cost.

For a Level 4 apprenticeship with a £15,000 funding band, that means:

• With levy: You pay £0 (levy covers it)
• After levy expires: You pay £3,750 (25% of £15,000)

This makes front-loading your levy spending even more important. Commit the highest-priority, highest-impact apprenticeships to your levy pot first. Plan units and flexible programmes for later when your levy may be depleted.

5. Level 7 Apprenticeships: New Starters Age 22+ No Longer Funded

Level 7 apprenticeships (equivalent to postgraduate level) have historically been funded for all ages. From April 2026, they're no longer funded for new starters aged 22 and over.

However: this affects new starts only. Any apprentice who started their Level 7 before January 2026 continues to be fully funded for the duration of their programme. Existing L7 apprentices are protected.

This affects employers in professional sectors — accountancy, law, engineering, HR — where Level 7 qualifications are common. If you were planning a Level 7 Accountancy or Level 7 HR Leadership apprenticeship for someone over 22, that's no longer an option through levy funding.

The rationale: the government is prioritising Level 3-5 apprenticeships to address mid-level skills gaps. Level 7 is being reserved for younger entrants (under 22) or for progression from lower levels.

What Stays the Same?

Amid the changes, it's worth noting what hasn't changed:

• The levy rate remains 0.5% of payroll above £3m per year
• Levy-paying employers still pay nothing from pocket for levy-funded training — the levy covers it
• Non-levy employers still get 95% government co-investment (5% cost to them) if they choose not to use apprenticeship units after levy is exhausted (the 25% applies to levy-exhausted situations, not all non-levy employers)
• All approved apprenticeship standards remain eligible
• Monthly rolling starts are still available from providers like TESS Group
• End-point assessment and qualifications work the same way

The Impact on Your Training Budget: Three Scenarios

Let's walk through what the new rules mean in practice for employers of different sizes.

Scenario 1: Mid-Size Employer (Payroll £4m)

Annual levy generation: Roughly £5,000

Under the old rules: You could let it accumulate. After two years, you'd have £10,000 to deploy on a full apprenticeship. Pressure to spend was low.

Under the new rules: £5,000 arrives in April 2026. It expires April 2027. You must commit it within 12 months or lose it.

Options: Start one apprenticeship unit (1-2 weeks, £2,500-3,500) plus plan for a larger apprenticeship. Or fund one full Level 3 apprenticeship and use units for upskilling later in the year.

Scenario 2: Large Employer (Payroll £10m)

Annual levy generation: Roughly £35,000

Under the old rules: You could spread multiple apprenticeships across two years without urgent pressure.

Under the new rules: £35,000 accrues over 12 months. You must deploy it by April 2027 or lose it. That's approximately 2-3 Level 4 apprenticeships or a mix of units and full apprenticeships.

This is where the 50% units cap becomes important. You could fund £17,500 in units across multiple departments, plus £17,500 in a full Level 4 apprenticeship.

Strategic approach: Units for urgent digital/AI upskilling (1-2 week intensive modules). Full apprenticeships for sustained capability building (18+ months). Together, they deploy your levy strategically.

Scenario 3: Large Employer Running Low on Levy (Payroll £15m, High Usage)

You've been active in apprenticeships. You've deployed significant levy. By Q4 2026, your pot is running low — perhaps £5,000 left to April 2027 expiry.

Now the 25% co-investment kicks in. If you want to start another apprenticeship at this point, you'll pay 25% of the funding band instead of nothing.

Lesson: Front-load your levy spending in April-June. Commit the largest programmes early. Save smaller units for later in the financial year.

A Note on Apprenticeship Units: The Qualification Question

A common question: do apprenticeship units lead to formal qualifications?

Yes, but with nuance. Each unit is part of a larger apprenticeship standard. When someone completes a unit, they receive a statement of unit completion and credit toward larger qualifications. If they progress to the full apprenticeship later, those units count toward end-point assessment.

However, units don't replace the need for a full apprenticeship if your goal is a complete, level-specific qualification. Think of units as stepping stones — valuable for rapid upskilling and credential building, but best used as part of a broader development pathway.

Digital, AI, and Engineering Units: What's Available Now?

The government has approved apprenticeship units in three priority sectors. Here's what's currently available:

Questions to Ask Your L&D and Finance Teams Now

The Growth and Skills Levy changes go live in 47 days. If you're a levy-paying employer, your team should be planning. Here are the key questions to discuss:

1. What's our current levy balance and expiry schedule? (Log into DAS and check.)
2. How much levy will we generate between April and December 2026? (Roughly 0.5% of monthly payroll above £3m.)
3. What are our top three skills gaps right now? (Could units address them in 1-2 weeks?)
4. Who needs sustained development? (Those are your full apprenticeships.)
5. Do we have any Level 7 apprentices starting after January 2026 aged 22+? (No longer fundable.)
6. When should we commit funds to avoid expiry? (Ideally Q2-Q3 2026, allowing buffer for implementation.)

Frequently Asked Questions

Can I still use my levy for AI apprenticeships?

Absolutely. All AI apprenticeships remain fully levy-eligible. The new apprenticeship units actually expand options — you can now fund AI fundamentals or prompt engineering modules (40-100 hours) in addition to full Level 3-4 AI apprenticeships. This gives you flexibility to upskill teams rapidly in AI before committing to longer programmes.

What if my levy runs out before April 2027?

You can still start apprenticeships. But you'll pay 25% co-investment instead of nothing. For a £15,000 programme, that's £3,750 out of pocket. This is why strategic front-loading of levy spending in April-June 2026 matters.

Are existing apprentices affected by the Level 7 change?

No. Only new starters aged 22+ for Level 7 are affected. If someone started a Level 7 apprenticeship before January 2026, they continue to be fully funded to completion, regardless of age. Existing apprentices are protected.

Can we mix units and full apprenticeships?

Yes. Your levy can fund up to 50% in units and the remainder in full apprenticeships. A typical strategy: £15,000 units (multiple 1-2 week modules across departments) and £15,000 full apprenticeship (18-month strategic development).

How quickly can we start units?

Many units have monthly or quarterly intake dates. Depending on your provider, you could be live within 2-4 weeks of commitment. Full apprenticeships typically start within 4-6 weeks.

What happens to the 10% top-up I was relying on?

It's gone. No automatic safety net. Plan your full 12-month budget in April 2026 and commit funds by December 2026 to ensure they don't expire.

Final Thoughts

The Growth and Skills Levy changes are real, and they're designed to push employers toward more active, strategic training investment. The introduction of short units is genuinely useful — it lets you upskill teams rapidly without lengthy commitment. But the shortened expiry window and higher co-investment rates mean you need to plan ahead.

The best time to have started planning was in January 2026. The second-best time is now. Audit your levy position, identify your top skills gaps, and commit funds in Q2 2026. Units and apprenticeships can start within weeks.

Your team needs upskilling. Your levy is real money. And from April 1st, the clock starts ticking — 12 months to use it.