From 1 August 2026, important changes to apprenticeship funding will affect how many employers plan, budget for and use apprenticeship programmes in England. For levy-paying organisations, the reforms mean tighter funding timelines and higher costs once levy funds are exhausted. For many smaller employers, the picture is more positive, with stronger support for recruiting and training younger apprentices.
Here are the headline changes businesses should be aware of.
What this means for levy-paying employers
If your organisation pays the levy, these reforms make planning more important than ever. The shorter 12-month expiry period means unused funds will disappear much faster, so employers will need a clearer pipeline of apprenticeship starts and progression routes. The removal of the 10% top-up also reduces the value of funds entering your account, while the higher 25% co-investment rate increases the cost of training once your levy balance has been used up.
In practical terms, employers who are actively managing their levy pot may still be able to fund apprenticeship training in full through available levy funds. However, businesses that delay decisions or allow funds to sit unused are more likely to lose value and face additional cash contributions.
Where sufficient levy funds are available, training and assessment costs continue to be covered from the employer’s digital account. The increased co-investment rate only applies once levy funds have been fully used.
Here is exactly how the funding mechanics work based on your account balance:
- 100% Levy Funded: If your digital account balance is higher than the monthly cost of the apprenticeship training, the full amount is automatically deducted from your pot. Your out-of-pocket cash contribution is 0%.
- When the 5% / 25% Co-investment Applies: You only have to pay a cash percentage if your levy pot runs out or drops to zero. Under the new August 2026 rules, once your pot is completely empty, you must co-invest 25% of the remaining monthly costs from your own funds, while the government pays 75%.
Essentially, as long as you manage your pipeline so that your monthly levy inflow covers your monthly training invoices, you will face no extra cash charges.
What this means for SMEs and non-levy employers
For many SMEs, the August 2026 changes create new opportunities to recruit and develop talent more affordably. Government support is increasing for younger apprentices, helping reduce the upfront cost of training and making apprenticeships a more accessible option for smaller businesses.
- Full funding for many younger apprentices: non-levy employers will see stronger government support for apprentices aged 16 to 24, reducing or removing employer training contributions in many cases.
- Continued support for older apprentices: for apprentices aged 25 and over, co-investment support remains in place, helping employers continue to develop existing staff as well as new recruits.
- Restrictions on some Level 7 provision: public funding for Level 7 apprenticeships is now more limited, particularly for older learners, so employers should review eligibility before planning higher-level starts.
Overall, the August 2026 changes make apprenticeship planning more important for all employers. Larger organisations will need to manage levy funds more carefully, while SMEs may find that apprenticeships become an even more attractive route for bringing in and developing talent.
What businesses should do now
- Review your apprenticeship pipeline. Identify planned starts, progression opportunities.
- Check your levy usage. Levy-paying employers should assess how much funding is at risk of expiring under the new 12-month window.
- Revisit budgets. Model the impact of the loss of the 10% top-up and the higher 25% co-investment rate where relevant.
- Confirm eligibility early. If you are considering Level 7 or younger apprentice recruitment, check the latest rules before making decisions.
- Plan with your training provider. A proactive training plan can help you make the most of available funding and avoid unnecessary costs.
You can see the changes on the government website below.
Apprenticeship funding rules and assessment plan guidance, 2026 to 2027 – GOV.UK