Who Pays for Apprentice Training? Levy Payers vs Non-Levy Employers

One of the most common reasons employers hesitate to hire apprentices is confusion about cost.

Who actually pays for apprenticeship training? Does the government cover it? Does the employer pay upfront?

The government funds the vast majority of training costs for most employers, and for smaller businesses hiring young apprentices, from 01 August 2026 that funding covers the full training fee. But the detail matters, because the rules differ depending on your payroll size and the age of your apprentice.

This guide explains how apprenticeship funding works in 2026, what has changed under the Growth and Skills Levy, and what you will and will not be expected to pay.

The two types of employer

Every UK employer falls into one of two categories when it comes to apprenticeship funding: levy payers and non-levy payers. Which group you fall into determines how your training is funded.

Levy-paying employers

If your annual pay bill exceeds £3 million, you are required to pay the Growth and Skills Levy. The levy is charged at 0.5% of your annual pay bill, with a £15,000 annual allowance deducted. Levy payments are reported and paid monthly through PAYE.

The money you contribute goes into a digital apprenticeship service account. You draw down funds from this account to pay for your apprentices' training. If your account holds enough funds, the training costs you nothing beyond what you have already contributed through the levy.

From 01 August 2026 (2026/27 academic year), the co-investment rate for levy payers who exhaust their funds is changing from 5% to 25%. That means if you have used all the money in your account, you will contribute 25% of remaining training costs, with the government funding the other 75%. Larger employers with high apprenticeship volumes should factor this into their planning.

Non-levy employers

If your annual pay bill is below £3 million, you are classed as a non-levy payer and do not pay the levy. You access apprenticeship funding through a co-investment arrangement with the government.

Until recently, the government funded 95% of training costs, with the employer contributing the remaining 5%. That model is now changing in favour of smaller businesses.

From August 2026, the government will fully fund apprenticeship training for non-levy employers hiring apprentices aged under 25. For apprentices aged 25 and over at non-levy employers, the 95% government co-investment continues.

What does funding actually cover?

Government funding covers the cost of apprenticeship training and assessment. Specifically, it pays for the training provider's fees and the end-point assessment at the end of the programme.

It does not cover everything. As the employer, you remain responsible for your apprentice's wages, pension contributions where applicable, providing 20% off-the-job training time, and general employment costs.

Wages are the main cost. Apprentices are employees and must be paid at least the National Minimum Wage for apprentices, currently £7.55 per hour, with many employers paying more. The training itself, however, is either fully funded or heavily subsidised depending on your business size and the apprentice's age.

What is the Growth and Skills Levy?

The Growth and Skills Levy replaced the Apprenticeship Levy in April 2025. For most employers, the mechanics are the same: the threshold remains at a £3 million pay bill, the rate is still 0.5%, and the £15,000 annual allowance is unchanged.

What is changing is how the levy can be spent. From April 2026, levy funds can be used to pay for apprenticeship units. Read our full breakdown of the April 2026 apprenticeship funding changes.

Levy funds can be used to pay for apprenticeship units, shorter training modules in priority areas such as AI, digital, leadership, and engineering. These sit alongside full apprenticeship programmes and give employers more flexibility to target specific skills gaps.

From the 2026/27 academic year, the expiry window for levy funds reduces from 24 months to 12 months. Funds not used within 12 months will expire, making it more important than ever to plan apprenticeship activity in advance.

Funding band caps

Every apprenticeship standard has a funding band cap, setting the maximum government contribution for that programme. If a provider charges above the cap, the employer covers the difference. Most providers price within the funding band, but it is worth confirming before you commit. Total People prices all programmes within the relevant funding bands, so you will never be asked to top up beyond your expected contribution.

Common misconceptions about apprenticeship funding

A few persistent myths are worth clearing up.

Apprenticeships are not completely funded. Training costs are funded or heavily subsidised, but wages and employment costs remain your responsibility. That said, for many SMEs hiring under-25s from August 2026 onwards, the training element will cost nothing.

You do not have to pay the full cost upfront. Funding flows directly to the training provider on your behalf, either from your levy account or through the government's co-investment arrangement. There is no invoice for training that you pay and reclaim.

Small and large businesses can access apprenticeships. The funding system is specifically designed to make apprenticeships accessible to smaller employers. Non-levy businesses benefit from a simpler funding process and, from August 2026, the best terms they have ever had for under-25 apprentices.

The levy applies to businesses with high pay bills. Only those with a pay bill above £3 million pay the Growth and Skills Levy. The majority of UK businesses fall below this threshold and access funding through co-investment instead.

How Total People makes it straightforward

At Total People, we work with employers of all sizes, from SMEs hiring their first apprentice to large levy-paying organisations managing multiple programmes. We help you understand what funding you are entitled to, set up your apprenticeship service account correctly, and guide you through every step from first conversation to end-point assessment.

Who pays for apprentice training depends on your business size, your apprentice's age, and the programme you choose. For most employers, the cost is significantly lower than expected. For smaller businesses hiring young people from August 2026, the training itself is fully funded.

Get in touch with our team today to find out exactly what funding is available for your business. Contact us and we will walk you through your options.