Apprenticeship Levy Transfer: How It Works and How Employers Can Benefit

Every year, billions of pounds in apprenticeship levy funds go unspent and expire back to the Treasury.

For large employers with levy accounts, that represents a significant amount of money paying for nothing. For smaller businesses, it represents a missed opportunity to access funding they did not know was available to them.

The apprenticeship levy transfer scheme changes that. It allows levy-paying employers to transfer up to 50% of their annual levy funds to other businesses, including SMEs, to pay for apprenticeship training. For employers who want to get more value from the levy, or for smaller businesses looking for a route into funded apprenticeship training, understanding how transfers work is well worth the time.

What is an apprenticeship levy transfer?

An apprenticeship levy transfer is a mechanism that allows levy-paying employers to share a portion of their unused levy funds with another organisation. The receiving business uses those funds to cover the training and assessment costs of their apprentices, in line with the apprenticeship levy transfer rules.

The transfer must be agreed and set up before the apprentice starts their programme. Once in place, funds flow from the sending employer's apprenticeship service account to the receiving employer's account and are used to pay the training provider directly.

Transferred funds can only be used for apprenticeship training and assessment costs. They cannot cover wages, travel, or any other employment costs. These remain the responsibility of the receiving employer.

Who can transfer levy funds and how much can be transferred?

Any employer that pays the Growth and Skills Levy, that is any employer with an annual pay bill above £3 million, can transfer a portion of their funds to another business.

Since 22 April 2024, the transfer allowance is set at 50% of the previous financial year's levy funds, including the English percentage applied and the 10% government top-up. This is calculated automatically by the apprenticeship service. Importantly, any unused transfer allowance does not carry forward to the next tax year. This is a use-it-or-lose-it figure recalculated each April.

There is no limit on the number of businesses a levy payer can transfer to. A single large employer could split their transfer allowance across multiple SMEs, supply chain partners, or community organisations, provided the total does not exceed their 50% allowance for that year.

Why should levy-paying employers consider transferring funds?

The most immediate reason is the expiry window. Currently, funds expire 24 months after entering a levy account. From August 2026, that window reduces to 12 months. This means larger employers with high levy contributions, but lower apprenticeship volumes will find unused funds expiring faster than before.

Transferring funds is the most productive alternative to watching that money return to the Treasury. But there are stronger reasons to transfer than simply avoiding waste.

Supporting your supply chain

Many large employers work with networks of smaller suppliers, subcontractors, and partners who cannot access levy funding themselves. Transferring levy funds to these businesses allows them to train apprentices in the same skills and standards your supply chain depends on. The result is a better-skilled, more capable supply chain that benefits the sending employer as much as the receiving one.

Community investment and CSR

Transferring levy funds to local businesses, charities, social enterprises, or organisations in underserved communities is increasingly recognised as a meaningful form of corporate social responsibility. It supports local employment, skills development, and social mobility without any additional cost to the sending employer. For organisations with public-facing CSR commitments, levy transfers offer a direct and measurable way to contribute to their communities.

Sector and workforce development

In industries facing skills shortages, levy transfers can help build the pipeline of talent the whole sector needs. A large employer in engineering, logistics, or healthcare, for example, might transfer funds to several smaller businesses in the same sector, supporting the growth of skilled workers across the industry.

How do SMEs benefit from apprenticeship levy transfers?

For businesses with a pay bill below £3 million that do not pay the levy, receiving a transfer opens up funding that would not otherwise be available.

Normally, a non-levy employer accessing apprenticeship training for an apprentice aged 25 or over contributes 5% towards training costs, with the government funding the remaining 95%. The same 5% applies currently to 22 to 24-year-olds who do not hold an Education, Health and Care (EHC) plan or have a local authority care history, since those groups are already fully funded under the existing rules. With a levy transfer, that 5% contribution can be covered by the transferred funds, meaning the training costs the receiving employer nothing at all.

From 1 August 2026, the remaining gap closes: 22 to 24-year-olds without an EHCP or care history will also become fully funded, putting the whole 16 to 24 age range on the same footing.

For apprentices aged 25 and over, the 5% co-investment continues unchanged. For employers in that position, or those wanting certainty now rather than waiting, a levy transfer removes the financial barrier immediately.

To receive a levy transfer, an SME needs to set up an apprenticeship service account, which is free and straightforward to do. The sending employer then initiates the transfer connection, both parties agree the apprenticeship details, and the training provider is paid directly from the transferred funds.

The step-by-step process for transferring levy funds

For levy-paying employers wanting to transfer funds, the process works as follows.

1. Log in to your apprenticeship service account. Under the Finance section, select Transfers to see your current transfer allowance and any existing transfer connections.
2. Identify the business you want to transfer to. They will need their own apprenticeship service account. If they do not have one, they can create it on Gov.uk before the transfer can be set up.
3. Enter the receiving employer's apprenticeship service account ID to initiate a transfer connection. The receiving employer accepts the connection from their account.
4. Once connected, the receiving employer adds the apprenticeship details to the system. The sending employer reviews and confirms the costs, which must fall within the relevant funding band for that standard.
5. Once the apprentice starts, funds flow from the sending employer's account to the receiving employer's account each month to cover the training provider's fees. A transfer must be agreed before the apprentice starts. Retrospective transfers are not permitted.

What the 2026 changes mean for levy transfer strategy

From August 2026, two changes make levy transfer planning more urgent for large employers.

The expiry window for levy funds drops from 24 months to 12 months. For organisations that consistently underspend their levy, this significantly increases the pressure to act. Our guide to what the 2026 apprenticeship funding changes mean for employers covers the full picture of what is changing and when.

The 10% government top-up on levy funds will also be removed from August 2026. This reduces the total value of the levy pot, which makes getting the most from the funds you do have even more important. Transfers before August 2026 still benefit from the top-up calculation, which means acting sooner rather than later has a measurable financial advantage.

It is worth noting that the funding change for under-25s on 1 August 2026 is narrower than it is sometimes presented. Most of that age group, specifically 16 to 21-year-olds and 22 to 24-year-olds with an EHCP or care history, are already fully funded under current rules. The change closes the remaining gap for 22 to 24-year-olds without that status.

How Total People supports levy transfers

Whether you are a levy-paying employer looking to transfer unused levy funds or an SME looking to receive a transfer to fund apprenticeship training, Total People can help you navigate the process from start to finish.

We work with employers across the North West and beyond to make levy transfers work in practice, not just in theory. We help levy payers identify suitable receiving organisations, support SMEs in setting up their apprenticeship service accounts, and make sure programmes are structured correctly so funds flow without complication.

If you are a levy payer approaching the end of your transfer window, or an SME that wants to explore whether a levy transfer could fund your apprenticeship programme, get in touch with our team today.