UK Apprenticeship Funding for Small Businesses That Don’t Pay the Levy: A Guide for US Companies’ English Teams

An employer in England that does not pay the Apprenticeship Levy gets 100% of training and assessment costs funded for apprentices aged 16 to 24, and pays 5% for apprentices aged 25 or older, up to the funding band maximum. It can also receive a £1,000 payment for apprentices aged 16 to 18, a £2,000 hiring payment for new apprentices aged 16 to 24 starting training from October 1, 2026, and a £2,000 incentive per foundation apprentice.

Plenty of US startups and mid-size companies run a small sales, support or engineering team in England. Those teams can use the English apprenticeship system to hire and train junior staff at little or no training cost. This guide explains the funding routes and payments for non-levy employers, based on the Apprenticeship funding rules for August 2026 to July 2027 (version 3), Department for Work and Pensions guidance and the Growth and Skills Levy factsheets. It is general information, not tax or legal advice.

First, confirm you are a non-levy employer

The funding rules define a non-levy paying employer as one, or a group of connected employers, with a collective annual pay bill of less than £3 million. HMRC counts payments subject to employer Class 1 secondary National Insurance contributions, and connected companies or charities are assessed together under the Employment Allowance connection rules.

Your share of training costs

Your 5% goes to the training provider in installments over the apprenticeship, following a schedule you agree. Using the £10,000 funding band from the funding rules’ own examples, that is 5% × £10,000 = £500 in total. The August 2026 increase to 25% you may have read about applies to levy payers who have used up their funds, not to non-levy employers. Apprentices themselves can never be asked to pay.

Two ways to unlock the funding

Reserve funds

1. Open an apprenticeship service account; all employers must use the service.
2. Pick the training course and the month training will start.
3. Reserve funds in the account’s finance section up to 3 months before the expected start, or authorize your provider to do it.
4. Reserve before recruiting or offering the apprenticeship to a current employee; backdating by one calendar month is allowed only in exceptional cases.
5. Start on time: unused reservations expire 3 months after the start date they record.

Since April 3, 2023, there is no cap of 10 new starts for small employers, so a growing team can recruit as many apprentices as it needs.

Get a levy transfer

Large levy payers can give away up to 50% of their previous year’s levy funds. Transferred money covers 100% of training and assessment up to the funding band maximum for the full apprenticeship, so it can even remove the 5% share for an apprentice aged 25 or older. Browse pledges on the public pledge page, filtered by location, sector, apprenticeship type and level, and apply to as many as you like. Before applying, know the standard, the number of apprentices, where they will work and the expected start date.

• Accept approved funds within 6 weeks, then link them to an approved apprenticeship within 3 months, or they lapse.
• Transfers fund new starts only, unless an apprentice is changing employer.
• If the sending employer runs out of funds, a non-levy recipient covers the cost through co-investment.
• You will complete a Minimal Financial Assistance declaration, as transfers may count under UK subsidy control rules.
• The sending employer pays only for training and assessment; wages and employment remain your responsibility.

Cash payments you can stack

The Growth and Skills Levy reforms factsheet says employers can claim more than one payment. Providers claim the first three below and must pass them to you within 30 working days of receiving them.

• £1,000 additional payment (all employers): apprentices aged 16 to 18, or 19 to 24 with an Education, Health and Care plan or care experience. Half after 90 days, half after 365 days, or after 242 days for shorter or foundation apprenticeships.
• £2,000 hiring payment (non-levy only): new employees aged 16 to 24 whose practical training period starts on or after October 1, 2026 and who joined you no more than 90 days before training starts. Two installments, day 90 and day 365 (or 242); earliest payment January 2027.
• £2,000 foundation apprenticeship incentive (all employers, where the standard carries it): £667 at day 90, £667 at day 242, and £666 if the apprentice starts a further, non-foundation apprenticeship with you within 6 months of completing.
• £3,000 Youth Jobs Grant (all employers): apprentices aged 18 to 24 who have been unemployed and on Universal Credit for 6 months or more; £1,800 after 6 weeks and £1,200 after 18 weeks, paid directly by DWP.

Hiring payments are checked against HMRC PAYE data, so the apprentice must be on the PAYE scheme added to your apprenticeship service account. The government reserves the right to change or withdraw the hiring payment, with at least three months’ notice.

Payroll savings for under-25s

Beyond training costs, the employer factsheet confirms there are no employer National Insurance contributions on eligible earnings for apprentices under 25. The apprentice minimum wage, according to GOV.UK, is £8 per hour for apprentices aged 16 to 18 and those aged 19 or over in their first year. Eligible care leavers receive a £3,000 bursary paid directly to them.

Pitfalls for teams managed from the US

• Offer letters sent before funding is secured. Reservations should come before recruitment; a one-month backdate is reserved for exceptional cases.
• Assuming the hiring payment covers current staff. It excludes anyone employed for more than 90 days before training starts.
• Paying the apprentice rate too early. The funding rules say the apprentice minimum wage rate can only be used from the apprenticeship start date shown on the agreement.
• Missing payment requests. If a provider gets no reply to at least three requests for bank details over three months, it must return the incentive to the government.
• Remote workers outside England. An apprentice must spend at least 50% of working hours in England, which the funding rules apply to remote and hybrid workers too.

A quick decision path

1. Confirm non-levy status, including any connected companies.
2. Decide the role and the apprenticeship standard, and check its funding band.
3. Hiring someone aged 16 to 24? Training is fully funded; check the £1,000, £2,000 and foundation payments.
4. Upskilling someone 25 or older? Budget 5%, or look for a levy transfer pledge that covers 100%.
5. Reserve funds or secure a transfer before making the offer.

To test your own scenario, ask the Apprenticeships in England knowledge base, for example “If the business sending us a levy transfer runs out of money partway through, do we have to pay the shortfall ourselves?” Each answer quotes the official source it draws on.

Official sources: How to take on an apprentice, Growth and Skills Levy reforms factsheet and Transferring your apprenticeship levy.