Free under-25 training is here. Here's how to make your levy go furthest.

The government has announced a serious package for young people, and most of it is genuinely welcome. There is real money on the table here for employers who move on it. There is also one piece of arithmetic worth understanding first, because it decides whether your levy stretches across your whole team or just part of it.

What was actually announced

The announcement from the DWP and DfE on 28 July includes several things that matter directly to employers:

• A new bursary of up to £4,500 per year per household. It targets Universal Credit families where the current system actively discourages apprenticeships. The Social Security Advisory Committee found single parents with a disabled child could lose up to £340 a week in benefits when a young person started an apprenticeship, against an expected apprenticeship salary of £258 a week. That is a real trap, and closing it is a good thing.
• Fully funded apprenticeship training for all eligible under-25s from 1 August 2026.
• Up to £8,000 in support for SMEs hiring young apprentices, and National Insurance relief for apprentices under 25. From October, smaller firms also get the £2,000 hiring bonus.

The bursary and the under-25 training are funded from the £1 billion additional investment in the Growth and Skills Levy announced in May. The stated goal is 50,000 new youth apprenticeships by the end of this Parliament, against a backdrop of more than a million young people NEET, around one in eight in England.

The bit worth planning for

Here is the part that will not make the headlines. Credit for raising it goes to David Lockhart-Hawkins, one of our governors, who flagged the second-order effect for levy-paying employers.

The logic runs like this.

1. Policy is pushing you towards under-25s. Free training, a bursary, NI relief, hiring bonuses. Entirely rational, and it will work.
2. For a levy payer, that training is still drawn against your apprenticeship service account. "Fully funded" means you pay no co-investment, not that the money appears from nowhere.
3. So the more under-25s you start, the faster your levy pot empties.
4. When it empties, everything else moves to co-investment. And co-investment rises from 5% to 25% for starts from 1 August.
5. In practice, "everything else" is your over-25s. Your existing staff, your managers, the people you were upskilling.

The more under-25s you take on, the faster the levy is spent, and an unexpected overspend then lands on the over-25s. Getting effective spend projections right is going to be a real competitive advantage. David Lockhart-Hawkins, Governor, TESS Group

Put crudely: you can be doing exactly what the government wants, hiring young people and training them, and still end up with a 25% bill on training you assumed was covered. Not because anyone misled you, but because two policies interact and nobody modelled the interaction.

A simplified illustration

Take an employer with £100,000 of levy entering their account this year, planning six apprentices at a £9,000 band.

Illustrative only, to show the mechanism rather than to model your account. Real figures depend on your inflow, funding bands, start dates and the 12-month expiry rule.

Notice that nothing has gone wrong in the right-hand column. The employer has taken on more young people, exactly as intended, and got the training free. They have simply used up the buffer that used to absorb their over-25 training.

One thing to confirm

We want to be straight about a detail. The announcement says government will "fully fund apprenticeship training for all eligible under-25s" without spelling out, in that release, the funding mechanism for levy payers specifically. The concern above assumes that under-25 training for levy payers continues to be drawn from the employer's account rather than paid centrally on top.

That is the reading of the sector people we trust, and it matches how the system currently works, but it is worth confirming against the funding rules for your own planning. If it turns out to be funded entirely outside employer accounts, the balancing act largely disappears. We will update this post either way.

Why forecasting is suddenly a competitive advantage

For years, levy planning was something most employers could afford to do badly. Funds sat for 24 months, co-investment was 5%, and the cost of getting it wrong was small.

Three changes have removed that slack at the same time:

• Expiry halves. Unused funds now expire after 12 months, not 24, so underspending is punished faster.
• Co-investment quintuples. Overspending now costs 25% rather than 5%.
• Under-25 incentives accelerate the burn rate. The behaviour policy is encouraging pulls your account down more quickly.

The gap between underspending and overspending has narrowed to a corridor, and the employers who model it will spend the same money to noticeably better effect than those who do not. As we found in the underspend figures, 54.2% of levy payers currently use a quarter or less of the funds entering their account, so most organisations have never needed this discipline. They are about to.

What a provider should be doing about this

This is where your choice of training partner stops being a procurement exercise and starts being a financial one. Most providers will sell you under-25 starts this autumn because the incentives make them easy to sell. Fewer will tell you what those starts do to the rest of your plan.

Three things we think an employer should expect from a provider right now, and which we build into how we work:

The short units matter more than they look here. If your levy is heading for empty, a 30-hour unit at £750 gets a senior person genuinely capable without committing the funds a full apprenticeship would. That flexibility is a lever most employers do not realise they have.

What to do about it

1. Build a 12-month projection, not a balance check. Model monthly inflow, planned starts by age band, funding bands, and the month your account would empty.
2. Sequence your starts deliberately. If over-25 training matters to you, get it started before the account runs dry, or before 31 July where the 5% rate still applies.
3. Separate the two populations in your plan. Under-25s and over-25s now have genuinely different economics. Planning them as one pot is what creates the surprise.
4. Use the incentives properly. The bursary, NI relief and the £2,000 hiring payment reduce the cost of young hires, so make sure someone owns claiming them.

The honest summary

This is a good announcement. Closing a benefits trap that cost a family £340 a week is the right thing to do, and fully funded training for under-25s will get more young people into work. We are not going to be cynical about that.

But good policy can still produce awkward arithmetic. If you pay the levy, the question to ask this week is not "should we take on more young apprentices", it is "if we do, what happens to everyone else's training in month nine?" The employers who can answer that will get more out of the same levy than the ones who cannot.

That is the work we do with clients every week, and it is the reason we rebuilt this business around AI apprenticeships before the funding landscape forced the issue. Our AI & Automation Practitioner Level 4, the Claude edition of it, and the short AI Leadership units are all funded through the Growth & Skills Levy, cover both age populations, and sit in the priority skills category. Ofsted Good, 4.9 out of 5 from more than 712 learners, and we will tell you when the answer is to do nothing.

Figures are from the DWP and DfE announcement of 28 July 2026 and the accompanying notes. The co-investment and expiry changes are from the published apprenticeship funding rules. The levy interaction described here is analysis, not government guidance, and the illustration is simplified. Confirm your own position before acting.

Sources

DWP and DfE, Government invests in young people with more opportunities close to home (28 July 2026), including the Social Security Advisory Committee and Milburn Review figures cited in the notes. Co-investment and expiry changes: apprenticeship funding rules. The levy interaction analysis was raised by David Lockhart-Hawkins.