Growth and Skills Levy Reforms, 1 August 2026: What Changes for Employers

From 1 August 2026, levy-paying employers in England face three system changes: co-investment for apprentices aged 25 and over rises from 5% to 25% once levy funds are exhausted, new funds entering levy accounts expire after 12 months instead of 24, and the 10% government top-up on monthly levy contributions stops. Separately, government funding is withdrawn from 16 apprenticeship standards for new starts from September 2026.

These changes are set out in the Growth and Skills Levy reforms factsheet (DWP and DfE) and written into the Apprenticeship funding rules for August 2026 to July 2027, version 3, which apply to all apprenticeships starting on or after 1 August 2026. The government presents the reforms as a refocus on young people and critical skills, backed by £1 billion in additional investment. Below, each change is dated and its scope explained.

1. Co-investment rises from 5% to 25% for levy payers

When a levy payer’s funds are exhausted, the employer contribution for apprentices aged 25 and over increases from 5% to 25% for new starts, with the government funding the remaining 75%. Paragraph 213.1 of the funding rules makes this the rule for apprenticeships starting on or after 1 August 2026.

• Existing apprentices already on programme keep the previous 95% government rate.
• Apprentices aged 16 to 24 remain fully funded for levy payers with insufficient funds (paragraph 214.2).
• Foundation apprenticeships are exempt from the 25% rate.
• Apprenticeship units follow the same split: for units starting on or after 1 August 2026, 75% government funding where a levy payer has insufficient funds and the learner is 25 or over.

Illustration, using the £10,000 funding band that appears in the funding rules’ examples: a 30-year-old starting after your funds run out now costs 25% × £10,000 = £2,500, compared with 5% × £10,000 = £500 for a start under the previous rate.

2. Levy funds now expire after 12 months

The expiry period for new funds entering accounts falls from 24 months to 12 months. Funds already in accounts before August 2026 keep the 24-month expiry. The apprenticeship unit technical funding guide gives a dated example: funds entering an account in September 2026 become unavailable in September 2027 unless spent.

• First in, first out: each payment uses the oldest funds first, whether they leave through payment or expiry.
• When money is spent: funds are spent when they leave the account as a payment to the training provider.
• Adjustments: negative levy adjustments are offset against the most recent unspent months; positive adjustments expire 12 months after being paid in.
• Dormant accounts: separately, levy accounts are reset where no levy declarations have been made to HMRC in the previous 24 months (funding rules, paragraph 216).

3. The 10% top-up has ended

Until 1 August 2026, the government added a 10% top-up to monthly levy contributions entering employer accounts. The reforms factsheet states that this top-up stops, and the levy transfer guidance was updated on 1 August 2026 to remove references to it. The unit funding guide adds that the expiry rule also applies to relevant top-ups that were previously added to accounts.

Together with the shorter expiry, this means a levy payer now has less money in its account, for less time. Planning starts across the year matters more than before.

4. Funding withdrawn from 16 standards

The factsheet notes that the offer has grown to more than 700 standards, some used mainly as professional development for established employees aged 25 and over. To refocus investment, funding is withdrawn from 16 standards for all new starts, regardless of age, from September 2026:

• Level 2: Professional Security Operative; Cleaning Hygiene Operative.
• Level 3: Custody and Detention Professional; Facilities Management Supervisor; Learning and Skills Assessor; Team Leader; Security First Line Manager; Public Sector Compliance Investigator and Officer.
• Level 4: Improvement Practitioner; Learning and Skills Mentor; Lead Practitioner in Adult Care.
• Level 5: Operations Manager; Outdoor Learning Specialist; Coaching Professional.
• Level 6: Chartered Manager (degree); Improvement Leader.

Existing apprentices on these standards are funded through to completion. Employers can still fund them privately, and the National Insurance exemption for apprentices under 25 still applies. Training providers delivering them face controls on new starts during the transition.

What the reforms add for young people

Alongside the changes for levy payers, the 2026 package adds products and payments aimed at younger apprentices:

• Foundation apprenticeships: Level 2 jobs with training for 16 to 21-year-olds (or under 25 in priority groups), minimum 8 months, fully funded for all employers, with a £2,000 incentive.
• Level 2 Administrative Assistant apprenticeship, funded only for 16 to 24-year-olds.
• Apprenticeship units: 30 to 140-hour courses over 1 to 16 weeks for employees aged 19 and over, in areas such as AI leadership, battery manufacturing and solar PV installation.
• £2,000 hiring payment for non-levy employers taking on new apprentices aged 16 to 24, from 1 October 2026.
• Level 7 restriction: under the 2026 to 2027 funding rules, Level 7 standards are funded only for apprentices aged 16 to 21, or 22 to 24 with an EHC plan or care experience.

Timeline of the key dates

The reforms sit on top of earlier changes that are still in force. Placing them in order helps when a colleague quotes an outdated rule:

The funding rules also state that they may change at any time, including funding and the products available under the growth and skills levy, so treat this timeline as accurate for version 3 of the 2026 to 2027 rules and check for later versions.

What to do now

1. Check your levy balance by month of entry and identify funds that will expire first.
2. Re-cost planned starts for staff aged 25 or over at 25% in case your account runs dry.
3. Prioritise starts for 16 to 24-year-olds and foundation apprentices, which remain fully funded.
4. Review whether any planned programmes use one of the 16 defunded standards.
5. Consider pledging surplus funds as a levy transfer before they expire.

The Apprenticeships in England knowledge base answers dated questions such as “How long do we have before unused funds in our levy account expire?” or “Is the 10% top-up still added?”, citing the factsheet or funding rules paragraph it relies on.

Sources: Growth and Skills Levy reforms factsheet, Apprenticeship unit technical funding guide and the Apprenticeship funding rules 2026 to 2027.