Apprenticeship Levy Shake-Up

Big changes are coming and they’ll hit your training, hiring plans and cashflow.

If you run a small or micro business, you’ve probably heard mutterings about the Apprenticeship Levy, usually from big firms who pay it and complain about it. From August 2026, the whole system is getting a major overhaul, and the ripple effects will land on the doorstep of the UK’s smallest employers.

The apprenticeship levy is basically a training tax on big employers.

Only companies with a wage bill over £3 million pay 0.5% of their payroll into a digital pot. The money can only be spent on apprenticeship training and assessment. If they don’t spend the money in the pot that levy money expires after 24 months. If they run out of funds, they pay 5% towards each extra apprentice. Levy funds expire after 24 months if not used. The Government adds a 10% top‑up to every pound paid in.

Small and micro businesses don’t pay the levy. A small business can get apprenticeships funded through the scheme as long as they contribute through co‑investment (currently 5%) However a small business can get 100% funding for an apprentice if a big employer transfers some of their levy pot to the small firm.

What’s changing

Levy money will expire TWICE as fast. From August, new levy funds paid by the big businesses will vanish after 12 months if they’ve not been used rather than 24 months. That means that big employers may panic‑spend their levy. It’s possible we’ll see a rush of apprenticeships and a scramble for training places.

The 10% government top‑up is being scrapped. At the minute, every £1 in levy becomes £1.10 because the Government contributes 10%. From August, there will be no government top-up. There will be less money in the system and big firms may cut apprenticeship numbers.

Co‑investment jumps from 5% to 25%. If big employers run out of levy funds, they’ll have to pay 25% of training costs for additional apprentices. Overspending becomes more expensive so there may be fewer apprenticeships and tighter budgets.

Small & micro businesses are likely to feel the shockwaves.

1. Large companies may:

• cut back on apprentice recruitment

• delay programmes

• switch to cheaper training routes

This reduces opportunities across supply chains and local labour markets.

2. Training providers will be under pressure

Providers will prioritise levy‑payers. Small firms may face:

• longer waits

• fewer course options

• stricter enrolment rules

3. Levy transfers will become gold dust

Because levy money expires faster, big employers will want to offload unused funds. But demand will explode. If you want a levy transfer, get in early.

4. More admin, more paperwork, more hoops

Providers and big employers will tighten compliance to avoid losing money. Small firms may see:

• more forms

• more evidence requests

• stricter timelines

5. If your business grows, the levy could hit you

If your payroll crosses £3m, you’ll suddenly face:

• faster expiry

• no top‑up

• higher co‑investment

• more admin

Plan ahead if you’re scaling.

Small businesses need to:

Secure levy transfers ASAP as competition will be fierce.

Book training places early because training providers will fill courses up fast.

Review your workforce plans to understand how the levy affects your future hiring.

Build relationships with big employers. They’ll have more expiring funds and more incentive to transfer them.

Choose apprenticeships that give you a strong return on your investment. Costs may rise; pick wisely.

The Apprenticeship Levy isn’t going away but from August 2026, it’s getting tougher, tighter and faster. Big employers will feel the squeeze and small businesses will feel the ripple effects. Get ahead of the changes now or risk being squeezed out of the system later.