How Does Apprenticeship Funding Work?

The UK government supports apprenticeships through the Apprenticeship Levy and additional funding for smaller employers. Here's how it operates:

The Apprenticeship Levy

Large employers with an annual payroll of over £3 million must pay the Apprenticeship Levy, which is set at 0.5% of their payroll. This levy is collected by HMRC and held in a digital account, which businesses can use to fund apprenticeship training. Funds in the digital account expire after 24 months if unused, encouraging businesses to invest in training sooner rather than later. If levy-paying employers exhaust their funds, the government will co-fund further training at a rate of 95%, with the employer contributing just 5%.

Funding for Small and Medium-Sized Enterprises (SMEs)

Businesses that do not pay the Apprenticeship Levy (those with an annual payroll under £3 million) can receive 95% of apprenticeship training costs covered by the government. In some cases, SMEs may be eligible for full funding, particularly if they are training apprentices aged 16-18 or care leavers under 25. Employers can also receive a £1,000 incentive for taking on an apprentice aged 16-18 or a care leaver.

Who Can Benefit from Apprenticeship Funding?

Employers

Large organisations can reinvest levy contributions into developing their workforce, filling skills gaps, and boosting employee retention.
SMEs can gain access to high-quality training with minimal financial burden, ensuring business growth and workforce development.
Public sector organisations can use levy funds to upskill staff and improve service delivery.

Apprentices

Individuals can earn while they learn, avoiding student debt while gaining industry-recognised qualifications.
Career changers and returners can access new opportunities in growing sectors without the financial barriers of traditional education.
Apprenticeships now range from Level 2 (GCSE equivalent) to Level 7 (Master's degree equivalent), making them suitable for all career stages.

Maximising Apprenticeship Funding For Levy-Paying Employers

Plan ahead: Identify skills gaps and use levy funds strategically before they expire.
Transfer funds: Large employers can transfer up to 25% of their levy funds to smaller businesses, supporting skills development across industries.
Utilise higher-level apprenticeships: Instead of relying solely on entry-level programmes, invest in advanced and degree apprenticeships to upskill existing staff.

For SMEs

Apply for funding early: Ensure funding is secured before taking on apprentices.
Collaborate with training providers: Work closely with providers to develop tailored apprenticeship programmes that align with business needs.
Leverage additional support: Take advantage of incentives for hiring young apprentices or care leavers.

The Future of Apprenticeship Funding

With increasing emphasis on skills development and lifelong learning, apprenticeship funding is likely to evolve to meet the changing needs of industries. The UK government continues to explore ways to make funding more accessible, particularly for SMEs and emerging sectors like digital, green energy, and healthcare.

For businesses and individuals alike, apprenticeships offer a cost-effective, practical route to professional development. By making the most of available funding, companies can future-proof their workforce while helping apprentices build fulfilling careers.