Apprenticeship Funding Is Changing: What This Means for Employers

Apprenticeship Funding Is Changing: What This Means for Employers

From 2026, significant changes to apprenticeship funding, levy rules and apprentice wages will affect how employers recruit and train staff across the UK. These reforms are designed to address skills shortages, encourage investment in young people and ensure apprenticeship funding is used more effectively.

While some changes will increase employer costs, apprenticeships continue to offer excellent value for businesses looking to develop skilled staff, improve retention and grow their workforce.

At DN Colleges Group, our employer relations and business engagement teams work closely with businesses to help navigate funding changes, recruitment and workforce development.

The New National Minimum Apprenticeship Wage

From April 2026, the National Minimum Wage for apprentices will increase to £8.00 per hour.

This increase reflects the government’s aim to ensure apprentices are fairly paid while gaining valuable workplace skills and qualifications.

What this means for employers

• Employers must review apprentice pay rates to ensure compliance.
• Apprentices can be paid the apprenticeship minimum wage during their first 12 months.
• After the first 12 months, employers must pay at least the standard National Minimum Wage for the apprentice’s age group.
• Payroll and workforce budgets may need adjusting.

Despite increased wage costs, apprenticeships remain one of the most cost-effective ways to recruit and train skilled employees.

Major Changes for Levy-Paying Employers

From 2026, several important changes will impact employers who pay the apprenticeship levy.

1. Levy Threshold

Employers with an annual wage bill of £3 million or more will continue to pay the apprenticeship levy at 0.5% of the portion of the wage bill above £3 million.

Levy-paying employers receive these funds through a digital apprenticeship account which can be used to pay for apprenticeship training.

2. Reduced Expiry Window for Levy Funds

What’s changing

From August 2026, levy funds will expire after 12 months instead of the current 24 months.

What this means for employers

Businesses will need to plan apprenticeship recruitment and training more proactively to avoid losing unused funds.

3. Removal of the 10% Top-Up

What’s changing

The government will remove the current 10% top-up applied to levy contributions.

What this means for employers

Employers will need to cover more of any funding shortfall themselves.

Note: This change does not apply to funds already in accounts.

4. Reduced Government Co-Investment

What’s changing

When levy funds are exhausted, government co-investment will reduce from 95% to 75%.

What this means for employers

Employers will now need to contribute 25% of apprenticeship training costs once levy funds are depleted.

This is a significant increase from the current 5% contribution and means careful budgeting and workforce planning will become increasingly important.

Changes for Non-Levy Employers

Government support for non-levy employers remains strong, particularly for SMEs recruiting younger apprentices.

1. Full Funding Expansion

Currently, training costs are fully funded for non-levy employers hiring apprentices aged 16 to 21.

From August 2026, this full funding will expand to include apprentices aged 16–24.

What this means for employers

• More affordable apprenticeship recruitment
• Greater support for SMEs
• Reduced training costs for younger apprentices
• Increased access to skilled talent pipelines

Funding for Apprenticeship Training Costs (from August 2026)

Financial Incentives for Hiring Apprentices

Several financial incentives will continue to support employers investing in apprenticeships.

1. £1,000 Additional Hiring Incentive

Available to all employers hiring apprentices aged 16–18 on their first day of learning.

This also applies to apprentices aged 19–24 who:

• Have an Education, Health and Care Plan (EHCP)
• Are care leavers

Payment Terms

• Two instalments of £500
• Paid at 90 days and 365 days

2. £2,000 SME Hiring Incentive (Available from October 2026)

Available to small and medium-sized employers hiring newly recruited apprentices aged 16–24.

This additional incentive provides stronger financial support for employers investing in young talent while helping reduce recruitment and onboarding costs.

Payment Terms

• Two instalments of £1,000
• Paid at 90 days and 365 days

3. £3,000 Youth Jobs Grant (Available from June 2026)

Available to all employers hiring newly recruited candidates aged 18–24 who have claimed Universal Credit for more than six months.

Payment Terms

• Two instalments of £1,500
• Paid at the end of month 1 and month 3

4. Combining Incentives

Where eligibility requirements are met, employers may be able to combine multiple grants and incentive payments.

DN Colleges Group’s business engagement team can support employers in identifying and accessing all available funding opportunities.

Need Support Navigating the Changes?

Despite the changes, apprenticeships remain a powerful tool for workforce development. In fact, for many employers, especially SMEs and some larger organisations, the system is becoming even more attractive thanks to new incentives and targeted support.

However, levy-paying employers will need to adapt quickly to:

• Shorter funding windows
• Reduced government contributions
• More proactive planning

Understanding apprenticeship funding can be complex, especially with new reforms coming into effect.

Here at DN Colleges Group, we’re here to help make sense of these changes to help maximise your opportunities when it comes to hiring an apprentice.
Read more about all the funding, incentives and national insurance relief for employers hiring an apprentice.

Find out how hiring an apprentice can help bridge the skills gap.