The UK apprenticeship system is undergoing its biggest reform in over a decade with the introduction of the Growth and Skills Levy, replacing the Apprenticeship Levy. Rolling out in 2026, the changes aim to boost youth employment, increase training flexibility, and focus funding on priority skills. Employers across Worcestershire and England should understand the new rules to maximise available funding.
Key changes for small and medium enterprises (SMEs)
SMEs will benefit significantly from the reforms. From April 2026, fully effective for the 2026/27 academic year, non-levy paying employers will receive 100% government funding for apprentices aged 16–24, removing the previous 5% employer contribution.
From October 2026, SMEs can also claim a £2,000 hiring grant for each new apprentice aged 16–24 who has been employed for less than three months. The incentive is intended to encourage recruitment and help address skills shortages.
Apprentices aged 25 and over will continue to receive 95% government funding, with employers contributing the remaining 5%.
Major reforms for levy-paying (larger) employers
Larger organisations paying the levy (those with a payroll over £3 million) will face tighter rules from August 2026:
Removal of the 10% government top-up: Levy contributions will no longer receive the monthly bonus.
Shorter fund expiry: Unused levy funds will expire after 12 months instead of 24, requiring faster planning and spending.
Higher employer contribution: After levy funds are used, government funding falls to 75%, leaving employers to cover 25% of training costs.
From April 2026, employers will also be able to use levy funds for modular apprenticeship units and approved short courses in priority areas such as digital skills, AI, and engineering.
Restrictions and focus areas
Government funding will increasingly focus on younger learners and essential skills:
From January 2026, Level 7 apprenticeships will mainly be limited to those under 22, with exceptions for care leavers and learners with Education, Health and Care Plans.
From September 2026, funding will be removed from 16 apprenticeship standards, mainly in leadership and management, where they are commonly used for professional development.
Practical steps for employers
To prepare for the changes:
Review current programmes — Assess existing apprenticeships and plan levy spending within the new 12-month expiry period.
Prioritise younger apprentices — SMEs should focus on recruiting 16–24 year olds to benefit from full funding and grants.
Work with training providers — Engage approved providers early to access updated programmes and modular training.
Plan budgets carefully — Allow for the increased 25% employer contribution where applicable and consider transferring up to 50% of unused levy funds.
Seek local support — Worcestershire employers can access guidance and funding through the Worcestershire Growth Hub, local chambers of commerce, and council apprenticeship schemes.
These reforms aim to create a more flexible skills system while prioritising young people entering the workforce. Employers who plan ahead, monitor official gov.uk updates, and adapt their training strategies will be best placed to benefit. Early preparation through reviewing programmes, forecasting spending, and exploring modular training can turn these changes into valuable workforce development opportunities.
