UK Apprenticeship Levy Co-Investment Rates from August 2026: A Guide for US Employers with Staff in England

For apprenticeships in England starting on or after August 1, 2026, an employer that pays the UK Apprenticeship Levy but has used up its levy funds pays 25% of training and assessment costs for an apprentice aged 25 or older; the government pays 75%. Employers that do not pay the levy pay 5% for that age group. For apprentices aged 16 to 24, the government covers 100% in both cases, up to the funding band maximum.

Many US-headquartered groups run a UK payroll and discover the levy only when it shows up on the monthly PAYE bill. This guide explains, for a finance or HR team based outside the UK, how that payroll cost turns into training money, and what you pay once that money runs out. Every figure comes from the official Apprenticeship funding rules for August 2026 to July 2027 (version 3), HMRC’s levy guidance and the Growth and Skills Levy reforms factsheet. Amounts are in pounds sterling; we do not convert them, because exchange rates are outside the scope of these sources.

Step one: does your UK entity pay the levy at all?

According to HMRC, the Apprenticeship Levy is charged at 0.5% of an employer’s annual pay bill and must be paid monthly by employers whose pay bill is more than £3 million, including any companies or charities they are connected to for Employment Allowance purposes. An annual £15,000 allowance reduces the amount due, and connected companies share a single allowance.

• What counts as pay bill: payments subject to employer Class 1 secondary National Insurance contributions, such as wages, bonuses and commissions, including pay of apprentices under 25.
• What does not count: earnings of employees who are not subject to UK National Insurance contributions legislation, of employees under 16, and benefits in kind subject to Class 1A contributions.
• Example (our calculation): a UK pay bill of £5 million gives 0.5% × £5,000,000 = £25,000, minus the £15,000 allowance = £10,000 of levy for the year.
• Connected groups: HMRC applies the Employment Allowance connection rules. Whether a particular US parent and its UK subsidiaries are connected is not something this article can determine; check HMRC’s guidance for your structure.

Step two: how levy payments become training funds

Levy paid to HMRC flows into an online apprenticeship service account. The apprenticeship unit technical funding guide explains that each month’s funds equal the levy declared multiplied by the share of the pay bill paid to employees living in England, and that funds arrive shortly after the 22nd of the month. If part of your UK team lives in Scotland, Wales or Northern Ireland, only the English share becomes usable funds.

Two changes from August 2026 reduce what sits in that account. The 10% government top-up on monthly levy contributions has stopped, and funds entering accounts from August 2026 now expire after 12 months instead of 24. The guide gives the example of funds entering in September 2026 becoming unavailable in September 2027 if unspent. Funds already in accounts before August 2026 keep the 24-month expiry.

Step three: the co-investment rates once funds run out

Ages are measured on the day the apprentice starts training. The 16 to 24 band also includes a 15-year-old whose 16th birthday falls between the last Friday of June and August 31. The Growth and Skills Levy reforms factsheet confirms that the jump from 5% to 25% applies to new starts only: apprentices already in training keep the 95% government rate.

What US finance teams often overlook

• The cap is the funding band maximum. Government money stops there; anything negotiated above it is paid in full by the employer (funding rules, paragraphs 213.3 and 215.1).
• Prior learning cuts the price. Paragraph 39.3.2 requires the price to drop by at least half the prior learning percentage, so 30% prior learning means at least 15% off the band.
• Apprentices can never be charged. Paragraph 220 forbids asking the apprentice to contribute to training or assessment costs.
• Status changes are not retroactive. If your UK pay bill crosses the £3 million line, paragraph 216.1 says changes to levy status are not backdated.
• Some programs are exempt. Foundation apprenticeships for eligible young people are 100% funded, and the toolkit states levy payers are exempt from the 25% rate on them.
• Short courses count too. Apprenticeship units (30 to 140 hours, staff aged 19+) also move to 25% employer co-investment for learners aged 25+ when levy funds are insufficient.

How the money reaches the training provider

Under paragraph 189 of the funding rules, the provider is paid 80% of the agreed price in equal monthly installments over the planned duration, either from your levy account or, if it has no funds, as government co-investment. The remaining balance, the completion payment, is paid once the apprentice has finished all activity including end-point assessment. Whether a given month is drawn from your levy funds or co-invested depends on the funds available in your account that month, which is why the 12-month expiry and the order in which funds are used matter for your budget.

The apprenticeship unit technical funding guide adds that accounts work on a first-in, first-out basis: each payment uses the oldest funds first. In practice, a steady pipeline of apprentices is the simplest way to avoid funds expiring unused, and to postpone the point at which 25% co-investment starts.

Using levy funds before they expire

If your English operation cannot spend its funds within 12 months, transfers are an option. Guidance on transferring levy funds says large employers can transfer up to 50% of the previous financial year’s levy funds (with the English percentage applied) to other businesses, which use them to pay 100% of training and assessment costs up to the funding band maximum. A transfer commits you to funding that apprenticeship until completion, and transfer payments leave your account before payments for your own apprentices.

For a quick check on your own case, ask the Apprenticeships in England knowledge base a precise question such as “How long do we have before unused funds in our levy account expire?” Answers cite the source document, which helps when you need to justify a budget line to headquarters. If you want to see how a cited answer is produced, read what RAG is.

Planning checklist for a US-managed UK team

1. Confirm with UK payroll whether the levy is declared each month on the Employer Payment Summary.
2. Log in to the apprenticeship service account and note the balance and the English percentage per PAYE scheme.
3. List planned starts with each apprentice’s age at the expected start date.
4. Apply the right co-investment rate and check the funding band maximum for each standard.
5. Decide early whether unspent funds should be transferred rather than left to expire.
6. Keep levy calculation records for at least 3 years after the tax year they relate to, as HMRC requires.

Official sources: Pay Apprenticeship Levy (HMRC), Apprenticeship funding rules 2026 to 2027 and the Growth and Skills Levy reforms factsheet. This is general information, not tax or legal advice.