From 1 April 2026, the Apprenticeship Levy is being transformed. Its new name, the Growth and Skills Levy, signals a broader shift in how the government expects employers to invest in workforce development. This comprehensive guide covers every change, what stays the same, and what you need to do now.
Whether you're a large payroll employer funding multiple apprenticeships, an SME hiring your first apprentice, or a training provider supporting employers, this guide answers every question about the April-October 2026 transition.
Interactive Timeline: Key Dates April-October 2026
What is the Growth & Skills Levy? (The Core Mechanism)
The Growth and Skills Levy retains the fundamental structure of the old Apprenticeship Levy:
- Who pays: Employers with annual payroll exceeding £3 million
- Rate: 0.5% of your pay bill above £3 million, calculated monthly
- How it accrues: Automatically added to your Digital Apprenticeship Service (DAS) account each month
- How you spend it: Funding apprenticeships and (now) apprenticeship units through approved providers
- Transfer allowance: You can still transfer up to 50% of your pot to other employers (supply chain, partnerships, etc.)
The 5 Biggest Changes You Must Know
1. Levy Expiry Shortened: 24 Months to 12 Months
The Change: Funds now expire after 12 months instead of 24. This is the single most important change for planning.
Critical Detail: This applies ONLY to funds deposited from 1 April 2026 onwards. Funds already in your account before 31 July 2026 retain their original 24-month expiry. The government is using FIFO (first-in-first-out) rules, so older funds are drawn down first.
What This Means: You must plan quarterly, not annually. £12,000 in annual levy generation must be committed within 12 months or it disappears. A large employer generating £50,000+ annually has even sharper pressure to commit strategically.
2. Apprenticeship Units: Up to 50% of Levy Eligible
The Change: Short, modular training courses are now levy-eligible. You can fund up to 50% of your levy pot in "apprenticeship units" instead of requiring 100% commitment to full 12-24 month apprenticeships.
What Are Apprenticeship Units?
- Short training modules: 30-140 hours (typically 1-4 weeks full-time)
- Government-recognised qualifications upon completion
- For employed workers aged 19+
- Count as credit toward full apprenticeships if the person later progresses
Currently Available Subjects (April 2026):
- AI Leadership: Generative AI, prompt engineering, AI implementation strategy
- Battery Manufacturing: Advanced manufacturing processes
- EV Charging: Electric vehicle infrastructure
- Electrical Fitting: Advanced electrical installation
- Modular Building: Offsite construction methods
- Solar Installation: Renewable energy systems
- Mechanised Welding: Advanced fabrication techniques
The 50% Rule: If your annual levy generates £24,000, you can spend up to £12,000 on units and must reserve at least £12,000 for full apprenticeships. This ensures employers don't neglect longer-term capability building.
Strategic Use: Units are perfect for addressing urgent skills gaps (AI adoption, sustainability skills, digital transformation) while reserving levy for deeper apprenticeships in priority technical or leadership roles.
3. 10% Government Top-Up Ends (1 August 2026)
The Change: Employers currently receive an automatic 10% bonus on levy contributions. This ends from 1 August 2026.
Example: If you paid £12,000 in levy in the past year, the government added £1,200 automatically. This no longer happens.
Impact: Your account balance won't reduce (existing funds aren't clawed back), but you don't get the bonus on future contributions. Combined with the 12-month expiry, this makes strategic spending essential.
Why the Change? The government is moving from passive safety-net funding to active accountability. The shorter expiry window forces more deliberate planning and spending. The loss of the top-up removes the cushion that allowed poor planning previously.
- × The 10% government top-up will stop
- × New funds will expire after 12 months (not 24)
- × When levy runs out, co-investment rises to 25% (from 1 August)
- ✓ Monthly levy accrual continues as normal
- ✓ Existing funds (pre-31 July) keep 24-month expiry
- ✓ Oldest funds still used first (FIFO)
- ✓ Unspent levy won’t stop your programme
Source: GOV.UK — Growth and Skills Levy
4. Co-Investment Rising: 5% to 25% When Levy Exhausted (From 1 August 2026)
The Critical Point: This change ONLY affects levy-paying employers who run out of levy funds, and only from 1 August 2026. Non-levy SMEs are unaffected and continue paying 5% co-investment (95% government funded).
What Changes: From 1 August 2026, when your levy pot is exhausted, if you want to continue funding apprenticeships, the government will pay 75% and you'll pay 25% (instead of the current 95% government, 5% employer). This is a five-fold increase in your contribution.
Example: A £15,000 Level 4 Apprenticeship
- With levy funds: You pay £0 (levy covers it)
- After levy exhausted: You pay £3,750 (25% of £15,000)
WHO THIS AFFECTS — Clear Breakdown:
| Employer Type | Scenario | Funding Split |
|---|---|---|
| Levy-paying employers (payroll over £3m) | With levy funds available | 100% government (levy covers it), 0% employer |
| Levy-paying employers | Levy pot exhausted (from 1 August 2026) | 75% government, 25% employer |
| Non-levy SMEs (fewer than 250 staff) | Any apprenticeship | 95% government, 5% employer |
| Non-levy SMEs | Under-25 apprentices | 100% government, 0% employer (NEW) |
| Any employer | Under-22 or care leavers/EHCP | 100% government, 0% employer |
Key Takeaway: Until 1 August 2026, the co-investment rate remains 5% for everyone. From August, the 25% rate only hits large payroll employers who exhaust their levy AND want to continue beyond their pot. SMEs are unaffected — and if you employ under-25s, they’re completely free.
5. 16 Apprenticeship Standards Defunded (1 September 2026)
The Change: From 1 September 2026, 16 apprenticeship standards are being defunded. No new apprentices can start on these standards, but existing learners are protected to completion.
The 16 Defunded Standards:
| Category | Standard | Level | Notes |
|---|---|---|---|
| Leadership/Management | Team Leader | L3 | Most popular defunded standard |
| Leadership/Management | Operations Manager | L5 | Covered by AI for Operations Leaders L4 |
| Leadership/Management | Coaching Professional | L5 | |
| Leadership/Management | Chartered Manager | L6 | |
| Care & Support | Lead Practitioner in Adult Care | L4 | |
| Compliance & Investigation | Custody & Detention Professional | L3 | |
| Compliance & Investigation | Public Sector Compliance Investigator | L5 | |
| Facilities & Support | Cleaning Hygiene Operative | L2 | |
| Facilities & Support | Facilities Management Supervisor | L3 | |
| Education & Learning | Learning & Skills Assessor | L3 | |
| Education & Learning | Learning & Skills Mentor | L3 | |
| Education & Learning | Outdoor Learning Specialist | L3 | |
| Education & Learning | Improvement Practitioner | L4 | |
| Education & Learning | Improvement Leader | L6 | |
| Security | Professional Security Operative | L3 | |
| Security | Security First Line Manager | L3 |
What This Means:
- For existing apprentices: No impact. They continue to completion under previous rules. Funding is protected.
- For new starts: A transition period runs from September to 17 December 2026 — providers can still enrol new learners during this window (capped at 75% of 2024-25 delivery volume). After 17 December, no new funded starts at all.
- For employers planning ahead: Start exploring alternative standards now. Don't wait until December — availability may be limited as the deadline approaches.
Recommended Alternatives for Leadership Standards: TESS Group recommends considering AI for People Leaders L4 or AI for Operations Leaders L4 as modern replacements for Team Leader L3 and Operations Manager L5. These provide leadership development with embedded AI adoption skills.
Other Important Changes: English & Maths, Duration, Assessment, and Foundation Apprenticeships
English & Maths Qualification Requirements (August 2025 onwards):
- Workers aged 19+: No longer need formal English & Maths qualifications. They can demonstrate competency through real work tasks and on-the-job assessment.
- Young people aged 16-18: Still required to have or work toward GCSE/equivalent English & Maths credentials.
Minimum Duration Reduced to 8 Months (August 2025):
- Apprenticeships can now last as short as 8 months (previously 12). This applies to apprenticeships starting from August 2025 onwards.
- Gives employers flexibility for shorter, more focused roles.
Assessment Streamlined:
- Training providers now handle elements of assessment alongside End-Point Assessment Organisations (EPAOs), making the process more proportionate and quicker.
- Reduces the burden of separate assessment gates and allows learners to progress more fluidly.
Level 7 Apprenticeships: Age Restriction for New Starters
- From April 2026, Level 7 apprenticeships are only funded for learners aged 16-21 (or under-25 care leavers/EHCP).
- New starters aged 22+ cannot access Level 7 funding (postgraduate-level apprenticeships).
- Existing Level 7 apprentices are protected to completion.
Foundation Apprenticeships Launched (NEW):
- What: Level 2 apprenticeships for 16-24 year olds in: construction, engineering, health/social care, digital, catering/hospitality, and retail.
- Duration: Shorter than traditional Level 3 apprenticeships; focus on employability + sector fundamentals.
- Employer Support: Employers receive up to £2,000 in support toward delivery costs.
- Perfect for: School leavers, career changers, and those building foundation skills.
SME Incentives: Unprecedented Support for Small Employers
If you're an SME (fewer than 250 employees), you now have the strongest incentives ever to hire and train apprentices:
1. Under-25 Apprentices Are Now 100% Funded (No Co-Investment)
From 1 October 2026, if you hire a 16-24 year old apprentice, the government funds 100% of training costs. You pay nothing. This is a game-changer for SMEs.
2. £2,000 Cash Incentive for 16-24 Year Old Apprentices (October 2026)
SMEs receive a cash payment of £2,000 per 16-24 year old apprentice after they've completed 90 days of employment. This incentive is in addition to the existing £1,000 incentive, bringing total support to £3,000.
Example for an SME:
- Hire a 20-year-old apprentice on a 18-month Level 3 apprenticeship (funding band: £12,000)
- Training cost to you: £0 (100% government funded)
- Cash incentive after 90 days: £2,000
- Net benefit: £2,000 cash + fully-trained employee
3. Universal Credit Youth Jobs Grant: £3,000 for All Employers
All employers (levy and non-levy) can access a £3,000 grant when hiring young people (16-24) on Universal Credit. This further reduces hiring friction.
What You Must Do Now: Action Plan for Employers
For Levy-Paying Employers (Payroll Over £3m)
- Audit your levy balance NOW. Log into your DAS account. What's your current balance? What's expiring in the next 6 months? What's expiring after 31 July 2026 (retains 24-month rule)?
- Calculate Q2-Q4 levy generation. How much levy will you accrue April-December 2026? (Roughly 0.5% of monthly payroll above £3m.)
- Identify your top 3 skills gaps. Can apprenticeship units address any (AI leadership, digital upskilling, manufacturing)? Or do you need full apprenticeships?
- Front-load spending in Q2 2026. Commit your largest programmes April-June to avoid the rush and expiry risk. Save units for later in the year.
- Plan for the 12-month expiry. Set quarterly reviews with your training provider to track commitments against expiry deadlines.
- Review Level 7 plans. If you have apprentices over 22 needing Level 7, find alternative funding or funding sources now.
- Consider the defunded standards. If you use Team Leader L3 or other defunded standards, plan alternatives immediately.
For SMEs (Fewer Than 250 Employees)
- Check your payroll eligibility. Are you under 250 employees? If yes, you qualify for SME incentives.
- Identify 1-3 roles for under-25 apprentices. Every hire under 25 is now free training + £2,000-3,000 cash.
- Plan foundation apprenticeships. If you're hiring school leavers, Foundation L2 apprenticeships are now available (construction, digital, engineering, etc.).
- Register for incentives. From October 2026, ensure your provider knows you're eligible for the £2,000 incentive.
- Link to Universal Credit Youth Jobs Grant. If you're hiring unemployed young people, claim the £3,000 grant alongside apprenticeship incentives.
Frequently Asked Questions (Interactive Accordion)
Is the Apprenticeship Levy still called the Apprenticeship Levy?
No. From 1 April 2026, the Apprenticeship Levy is officially renamed the Growth and Skills Levy. The mechanism and rate remain unchanged (0.5% of payroll over £3m), but the name reflects the government's broader focus on upskilling through both apprenticeships and short units. You'll see "Growth and Skills Levy" on all government documents and your DAS account from April onwards.
Do I still pay 0.5% of my payroll?
Yes, absolutely. The levy rate has not changed. It remains 0.5% of your annual pay bill for amounts exceeding £3 million. This is calculated monthly and added to your DAS account. The levy rate will not increase; only the name and the rules around expiry and spending have changed.
What exactly are apprenticeship units and how do they work?
Apprenticeship units are short, government-approved training modules lasting 30-140 hours (typically 1-4 weeks of full-time delivery). They're available from April 2026 in subjects like AI Leadership, Battery Manufacturing, EV Charging, Electrical Fitting, Solar Installation, and Mechanised Welding. Each unit delivers a government-recognised qualification. They count as credit toward full apprenticeships if a learner later progresses. You can fund up to 50% of your levy pot in units; the remaining 50% must support traditional apprenticeships.
Does the 25% co-investment rate apply to all employers?
No. From 1 August 2026, the 25% rate ONLY applies to levy-paying employers (payroll over £3m) who have exhausted their levy pot and want to continue funding additional apprenticeships. Until August 2026, the co-investment rate remains 5% for everyone. Non-levy SMEs are completely unaffected by this change and continue paying just 5% co-investment (95% government funded). Under-25 apprentices at SMEs are 100% funded. Under-22s or care leavers/EHCP at any employer are 100% funded.
What happens to my existing levy balance after 31 July 2026?
Funds in your account before 31 July 2026 retain their original 24-month expiry date. Any new funds from 1 April onwards expire after 12 months. The government uses FIFO (first-in-first-out) rules, so your oldest funds are drawn down first. This means you have overlapping expiry windows: old money expires later; new money expires faster. Track both carefully. Your DAS account should show expiry dates clearly.
Can I still transfer my levy to other employers?
Yes. You can transfer up to 50% of your levy pot to other employers, the same as before. This is useful for supply chain partners, subsidiaries, or connected entities. The transfer mechanism hasn't changed—it's still managed through your DAS account. You can transfer funds regardless of the expiry date (old or new funds), but the expiry rule follows the funds, so transferred funds retain their original expiry dates.
What replaces the defunded Team Leader Level 3 apprenticeship?
The Team Leader L3 is being defunded from September 2026. TESS Group recommends considering AI for People Leaders L4 or AI for Operations Leaders L4 as modern replacements. These provide traditional leadership competencies (from CMI) combined with AI adoption and digital leadership skills—making them more future-focused than the old Team Leader L3. Other alternatives include custom leadership bootcamps or management foundation courses from approved providers.
Are my existing apprentices affected by these changes?
No. All changes apply only to NEW apprenticeships starting from 1 April 2026 onwards. Existing apprentices in programmes are fully protected. They continue under the previous rules, with previous funding levels and expiry dates. If someone started a Team Leader L3 before September 2026, they can complete it. If someone started a Level 7 apprenticeship before January 2026, they remain fully funded regardless of age. Existing learners are protected; new starts follow the new rules.
What are Foundation Apprenticeships and who should use them?
Foundation Apprenticeships are new Level 2 programmes for 16-24 year olds in construction, engineering, health/social care, digital, catering/hospitality, and retail. They're shorter than traditional Level 3 apprenticeships and focus on employability + sector fundamentals. Employers receive up to £2,000 in support. They're ideal for school leavers, career changers, or anyone building foundational skills before progressing to Level 3/4. Perfect for SMEs hiring for entry-level roles.
What is the new SME incentive for 16-24 year old apprentices?
From October 2026, SMEs (fewer than 250 employees) receive a £2,000 cash incentive for hiring and training 16-24 year old apprentices. The payment is made after the apprentice completes 90 days of employment. This is in addition to the existing £1,000 incentive, bringing total incentive support to £3,000. Combined with 100% government funding for under-25s (from October 2026), SMEs now have unprecedented support for hiring young talent.
Co-Investment Rates: The Complete Picture
To avoid confusion, here's every possible scenario and who pays what:
| Employer Type | Apprentice Age & Details | Funding Scenario | Employer Pays | Government Pays |
|---|---|---|---|---|
| Levy Employer (Payroll over £3m) |
Any age | Levy funds available | 0% (levy covers) | 100% |
| Levy Employer | Any age | Levy exhausted (from 1 Aug 2026) | 25% | 75% |
| Non-Levy SME (Fewer than 250 staff) |
Under 25 | Any apprenticeship (Oct 2026+) | 0% | 100% |
| Non-Levy SME | 25 or over | Any apprenticeship | 5% | 95% |
| Non-Levy Large Employer (250+ staff, no levy) |
Under 22, care leaver, or EHCP | Any apprenticeship | 0% | 100% |
| Non-Levy Large Employer | 22 or over | Any apprenticeship | 5% | 95% |
Defunded Standards: Complete List with Alternatives
Here are all 16 defunded standards and recommended alternatives where relevant:
| Standard | Level | Defunded From | Recommended Alternative |
|---|---|---|---|
| Team Leader Defunded | L3 | 1 Sept 2026 | AI for People Leaders L4, Leadership Foundation |
| Operations Manager Defunded | L5 | 1 Sept 2026 | AI for Operations Leaders L4 + additional study |
| Coaching Professional Defunded | L5 | 1 Sept 2026 | Executive Coaching (private), CIPD Coaching |
| Chartered Manager Defunded | L6 | 1 Sept 2026 | Advanced Leadership (custom), CMI L6 Diploma |
| Cleaning Hygiene Operative Defunded | L2 | 1 Sept 2026 | None — consider in-house induction |
| Custody & Detention Professional Defunded | L3 | 1 Sept 2026 | None announced — consult with justice providers |
| Facilities Management Supervisor Defunded | L3 | 1 Sept 2026 | Operations Supervisor (if available), custom FM training |
| Improvement Leader Defunded | L6 | 1 Sept 2026 | Lean/Six Sigma, custom continuous improvement |
| Improvement Practitioner Defunded | L4 | 1 Sept 2026 | Lean/Six Sigma practitioner, custom improvement training |
| Lead Practitioner in Adult Care Defunded | L4 | 1 Sept 2026 | Adult Care L3 or custom care leadership |
| Learning & Skills Assessor Defunded | L3 | 1 Sept 2026 | TAQA or internal assessor training |
| Learning & Skills Mentor Defunded | L3 | 1 Sept 2026 | Custom mentoring/coaching training |
| Outdoor Learning Specialist Defunded | L3 | 1 Sept 2026 | None — consider outdoor education partnerships |
| Professional Security Operative Defunded | L3 | 1 Sept 2026 | Security Industry Authority (SIA) qualifications |
| Public Sector Compliance Investigator Defunded | L5 | 1 Sept 2026 | Custom compliance/investigation training |
| Security First Line Manager Defunded | L3 | 1 Sept 2026 | Team Leader L3 (still available), SIA supervisory qualifications |
Related Reading: Deep Dive Into Specific Topics
Want to explore specific changes in more detail? Check out these companion guides:
What You Need to Do in the Next 30 Days
The Growth and Skills Levy changes are live now. Here's your 30-day action checklist:
- Week 1: Log into your DAS account. Audit your current levy balance, check expiry dates, and understand your baseline position.
- Week 2: Calculate your Q2-Q4 2026 levy generation. Schedule meetings with your L&D and Finance teams to plan spending strategy.
- Week 3: Identify your top 3 skills gaps. Could apprenticeship units address any? Request unit prospectuses from TESS Group or your provider.
- Week 4: Commit to your first apprenticeships or units. Lock in April-May 2026 starts to avoid the rush and expiry pressure later in the year.
Need Help Navigating the Changes?
The Growth and Skills Levy changes are significant, and strategic planning is essential. TESS Group specialises in helping employers navigate this transition—from planning levy deployment across units and apprenticeships, to identifying alternatives for defunded standards, to maximising SME incentives. Our team can help you avoid expiry losses, front-load spending strategically, and unlock modern apprenticeships in AI, digital, and leadership.
Get a Free Levy Strategy ReviewFinal Thoughts
The Growth and Skills Levy is not a small tweak—it's a fundamental shift in how employers are expected to invest in training. The 12-month expiry window, the higher co-investment rates for levy-exhausted employers, the loss of the 10% top-up, and the new defunding of 16 standards all signal a move toward active, strategic training investment rather than passive levy management.
But the changes also bring genuine benefits: apprenticeship units unlock rapid upskilling for urgent skills gaps. SME incentives have never been stronger. Under-25 apprentices are now free for small employers. And the shift toward modern standards (like AI for leadership) puts the apprenticeship system in line with where the economy is heading.
The best time to have started planning was in January 2026. The second-best time is today. Review your levy position, identify your skills gaps, and commit funds now. Units and apprenticeships can start within 4-6 weeks of commitment. Your team needs training. Your levy is real money. And from 1 April, the 12-month clock is ticking.