The Growth and Skills Levy 2026: What Employers Need To Know

When we last reviewed the 2025–2026 funding landscape, we focused on stability through predictable co-investment and streamlined incentives. However, as the horizon shifts toward the new “Growth and Skills Levy”, stability is no longer the objective. For ambitious businesses, the new objective is agility.

The transition from the ‘Apprenticeship Levy’ to the ‘Growth and Skills Levy’ is more than a name change. It’s a fundamental pivot in how the UK government supports workforce development. 

We look at what this means to both SMEs and large enterprises below, as well as how these policy shifts can be turned into a competitive advantage for your organisation.

What are the main changes for businesses?

The most significant evolution is the move away from the "one-size-fits-all" 12-month minimum duration.

Starting April 2026, the levy will now also fund short and flexible apprenticeship ‘units’, with up to 50% of the levy available to use on shorter courses which can  last as little as one week. These units are designed to help businesses tackle critical skills gaps immediately across areas such as AI and digital.

How does the 2026 Levy change affect large enterprise employers?

For levy-paying organisations (those with an annual pay bill of over £3 million), the new rules introduce a sense of urgency. The government is tightening the window for fund utilisation. This means your training strategy must be more proactive than ever.

• 12-month expiry: levy funds will now expire after just 12 months. This is a significant reduction from the previous 24-month window. If you do not invest in your talent, those funds return to the Treasury.

• Reduced co-investment rate: once your levy pot is exhausted, the cost of additional training will rise. The government’s co-investment contribution is dropping from 95% to 75%. This means employers will now pay 25% of the costs for extra training.

• Level 7 refocus: from January 2026, government funding for Level 7 (Master’s level) apprenticeships will be restricted to those aged 16 to 21. This shifts the focus back to entry-level high-fliers rather than mid-career management.

How does the 2026 Levy change affect SMEs?

For small and medium enterprises, the new levy removes the financial friction of hiring young talent and provides greater flexibility, enabling focused training in a much shorter space of time.

In a major boost, the government will now cover 100% of training costs for apprentices under the age of 25. This is an increase from the previous age-22 limit. This allows SMEs to build a high-calibre and digital-native workforce with fully funded training for their youngest hires.

What should businesses do following the introduction of the new Growth and Skills Levy?

Further details on how the Growth and Skills Levy will work operationally are due to be shared in early 2026, but here is what your business should be considering now:

1. Audit your expiry: review your apprenticeship account today. With a 12-month clock, your 2026 planning needs to happen now.

2. Target the under 25s: capitalise on the 100% funding to bring in fresh, high-potential talent before the new modular units launch in 2026.

3. Think modular: identify the specific technological or digital units your team needs to stay ahead of the competition
   
   

Pareto’s takeaway

The move to the Growth and Skills Levy is a fundamental shift from compliance to competitive advantage. In a world where 80% of your business impact is driven by the top 20% of your talent and high-value skills, this new flexibility is your greatest asset.

• For enterprises: the "use it or lose it" 12-month window demands a proactive strategy. Stop viewing the levy as a tax and start using it as a high-velocity fund for digital transformation.

• For SMEs: the "Youth Guarantee" is your open door to high-calibre talent. By securing 100% funding for those under 25, you can build a future-ready team with zero training costs.

The businesses that win will be those that align their training spend with the speed of the market, obtaining the skills required to lead in their industry and achieve the highest ROI.

Ready to future-proof your workforce? Find out more about training and apprenticeship opportunities at Pareto.