What Is the Growth and Skills Levy?

The Growth and Skills Levy is the government’s replacement for the apprenticeship levy in England. It’s the same charge — 0.5% of pay bills over £3 million — but the money can now fund short courses called apprenticeship units alongside full apprenticeships. The new name took effect in April 2026, the first units could start from 28 April 2026, and a set of much tighter funding rules follows on 1 August 2026.

Most of the coverage so far has been written for employers, which is a shame, because the changes land hardest on providers — your funding rules, your product range and your employer conversations are all shifting at once. So this is the provider’s version: what the levy is, what’s changed, what’s still unconfirmed, and what to do about it. Every figure traces to a published source, and where something isn’t confirmed yet I’ve said so rather than guessed.

What it is, and what it replaced

The Growth and Skills Levy replaces the apprenticeship levy, which ran from 2017 and could only be spent on full apprenticeships. The new levy keeps the same collection mechanism but widens what the money can buy.

A quick recap for anyone who’s been heads-down in delivery. The apprenticeship levy was introduced in 2017 as a 0.5% charge on large employers’ pay bills, ring-fenced for apprenticeship training. Employers complained for years that it was too rigid — if your skills gap needed a twelve-week course rather than an eighteen-month apprenticeship, the levy was no use to you. The Chancellor confirmed the reform detail at the Autumn Budget in November 2025: the levy would be renamed, short courses funded from April 2026, and the funding rules rebalanced from August 2026.

One structural change sits underneath all of this. Skills England replaced IfATE in June 2025, then moved with the whole apprenticeships brief from the DfE to the Department for Work and Pensions on 16 September 2025. The body deciding which courses get funded is barely a year old and has already changed departments once.

Who pays it, and how much

UK employers with an annual pay bill over £3 million pay the levy at 0.5% of their total pay bill — exactly as they did under the apprenticeship levy. The rename changed what the money can be spent on, not who pays or how much.

That continuity matters when you’re talking to employers, because plenty of them have heard “the levy is changing” and assumed their bill is going up. It isn’t. What’s changing is the spending side: levy funds sit in an employer’s apprenticeship service account and can now be drawn down for apprenticeship units as well as full apprenticeships, while smaller employers who don’t pay the levy access government co-investment as before — on terms that are getting more generous for young apprentices and less generous for everyone else.

Two SME changes worth knowing when employers ask. From the 2026/27 academic year, the government fully funds apprenticeship training for non-levy payers where the apprentice is under 25 — up from under 22. And from October 2026, SMEs can claim up to £2,000 when they recruit an apprentice aged 16 to 24 — with one timing condition that matters in employer conversations: the apprentice must have joined the employer within the three months before their apprenticeship start date.

Apprenticeship units: the genuinely new bit

Apprenticeship units are short, levy-funded courses carved out of existing apprenticeship standards — 30 to 140 delivery hours over 1 to 16 weeks, for employed adults aged 19 and over. They’re the first time levy money has been spendable on anything other than a full apprenticeship — within a limit: employers can put up to 50% of their annual levy funds towards units, and must keep at least 50% for full apprenticeship programmes.

Ten units went live with an earliest start date of 28 April 2026, concentrated where the government sees urgent skills gaps: welding, electrical and mechanical fitting, battery manufacturing, EV charging point installation, solar PV installation, modular building assembly, and three AI leadership units covering strategy, adoption and governance, and delivery. Funding rates run from £750 for a 30-hour AI leadership unit up to £3,200 for 140 hours of modular building assembly.

The eligibility rules are deliberately narrow. Learners must already be employed, with an upskilling need their employer has identified — units are explicitly not for people starting a new career or occupation. Payment to providers comes in two milestones: 30% once you’ve delivered 30% of planned hours, and the remaining 70% when the learner completes all hours and passes a skills test, which providers deliver themselves with employer validation.

The funding rule changes coming on 1 August 2026

From 1 August 2026, three rules change at once: the 10% government top-up on levy funds stops, new levy contributions expire after 12 months instead of 24, and employer co-investment jumps from 5% to 25% of training costs. Together they make levy money scarcer and faster-moving.

Take those one at a time. The top-up meant every £1 an employer paid in became £1.10 to spend; from August, £1 in is £1 out. The expiry change halves the window for spending new contributions, though funds already in accounts keep the old 24-month rule. And the co-investment rise is the big one for your sales conversations: once an employer’s levy pot is empty — or for a non-levy employer who doesn’t qualify for full funding — they now cover a quarter of the cost rather than a twentieth. On a £9,000 apprenticeship, the DfE’s own worked example puts the employer contribution at £2,250 a year.

There’s a Level 7 change already in force too. Since 1 January 2026, new starts on Level 7 apprenticeships are only funded for learners aged 16 to 21 — or under 25 for care leavers and those with an EHCP.

What this means if you’re a training provider

The short version: a new product line has opened up, but access to it is gated, and the economics of your core apprenticeship business are tightening at the same time.

Start with the gate. Initial delivery of apprenticeship units is restricted to providers the government judges “strong” — you must have delivered the linked standards in 2024/25, be on the apprenticeship provider and assessment register, and carry no “at risk” indicators under the accountability framework and no contractual funding restrictions. If you qualify, you’re in a small early field. If you don’t, the published criteria tell you exactly what to fix before the offer scales up.

Then the economics. Providers have already warned that unit funding rates are tight — FE Week reported sector concern that the model “is not a winning formula” — and the government has reserved the right to withdraw units with four weeks’ notice on affordability grounds. Meanwhile the 25% co-investment rate will make some employers hesitate over full apprenticeships, the 12-month expiry will push levy payers to spend faster, and defunded Level 7 provision is disappearing from order books. Your employer conversations just got more complicated, and the providers who can explain the new rules clearly will win them.

What’s confirmed, what isn’t

The confirmed picture covers the rename, the first ten units, and the August 2026 funding rules. What’s not yet confirmed is how far and how fast the offer expands beyond that.

The government has said the restricted launch is deliberate — a “controlled way” to gather “early insights before scaling up” — but it hasn’t published a date for opening unit delivery to the wider provider base, and it hasn’t confirmed which subjects come next beyond the broad industrial strategy commitment to digital, AI and engineering. Whether unit funding rates rise, and whether the levy eventually funds non-apprenticeship courses more broadly, are open questions. Anyone giving you firm answers on those is making them up.

What you can rely on is direction of travel: shorter, more modular, more employer-led training, funded from the same pot as apprenticeships and competing with them for it. The DfE published an apprenticeship unit toolkit for providers on 10 June 2026, which is a reasonable signal that wider engagement is coming.

What providers should do now

Check your eligibility, model the August numbers, and start building short-form curriculum capability before the offer scales — because when it does, the providers with delivery-ready content will move first.

In practice, that’s three jobs. First, audit yourself against the published unit criteria: 2024/25 delivery of the linked standards, APAR registration, a clean accountability record. Second, rework your employer pricing conversations for the 25% co-investment world, because “the government pays 95%” stops being true for many of your accounts on 1 August. Third — and this is the one that takes longest — get curriculum ready. A 30-hour unit is not a full apprenticeship with bits cut out; it needs designing as a short course, with its own assessment and a skills test you can stand behind. If your team is already stretched delivering what you’ve got, that’s the work we do — fixed cost, mapped to the standard, yours to keep. Have a look at how we work with providers if that would help.

None of this rewards panic. It rewards the providers who read the rules early and built accordingly.

Growth and Skills Levy: FAQs

When will the Growth and Skills Levy start?

It has already started. The levy took its new name in April 2026, the first apprenticeship units had an earliest start date of 28 April 2026, and the remaining funding rule changes — the end of the 10% top-up, 12-month fund expiry, and 25% co-investment — take effect on 1 August 2026.

How is the Growth and Skills Levy different from the apprenticeship levy?

The charge is identical; the spending rules are not. Levy funds can now pay for short apprenticeship units as well as full apprenticeships, and from August 2026 the funds expire faster (12 months rather than 24), lose the 10% government top-up, and carry a 25% employer co-investment rate once exhausted.

Who pays the Growth and Skills Levy?

UK employers with an annual pay bill over £3 million, at 0.5% of their total pay bill — the same employers who paid the apprenticeship levy. Smaller employers don’t pay it, and from the 2026/27 academic year they get apprenticeship training fully funded for apprentices under 25.

What are apprenticeship units?

Short, levy-funded courses drawn from existing apprenticeship standards — 30 to 140 delivery hours over 1 to 16 weeks. Ten launched from April 2026, covering welding, fitting, battery manufacturing, EV charging, solar PV, modular building assembly and AI leadership, with funding rates from £750 to £3,200. They’re for employed adults aged 19+ with an employer-identified upskilling need, not career changers.

Can any provider deliver apprenticeship units?

Not yet. Initial delivery is limited to providers who delivered the linked standards in 2024/25, are on the apprenticeship provider and assessment register, and have no “at risk” accountability indicators or funding restrictions. The government has said it will scale up after the first phase but hasn’t confirmed when.

What happened to Level 7 apprenticeship funding?

From 1 January 2026, new starts on Level 7 (master’s-level) apprenticeships are only funded for learners aged 16 to 21 — or under 25 for care leavers and those with an education, health and care plan. Older learners can still do Level 7 apprenticeships, but the levy won’t pay for them.

Does the levy still fund full apprenticeships?

Yes. Full apprenticeships remain the core of what the levy pays for, and nothing about the rename changes that. What changes is the surrounding arithmetic: employers’ levy funds expire faster, the top-up is gone, and co-investment after the pot runs dry rises to 25% from 1 August 2026.

Is the Growth and Skills Levy run by Skills England?

Skills England — the executive agency that replaced IfATE in June 2025 — advises on what the levy should fund, and the government has said it will work with Skills England to decide which courses are prioritised. The agency moved from the DfE to the Department for Work and Pensions on 16 September 2025, along with the wider apprenticeships brief.