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, placing a premium on "critical" skills and younger talent. 

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 and a total refocus of which roles receive public support.

• Modular Flexibility: The levy now funds short, flexible apprenticeship ‘units’. Up to 50% of your levy can be used on these shorter courses (some lasting as little as one week) to tackle immediate gaps in areas like AI and digital transformation.

• Withdrawal of Management Funding: From September 2026, government funding for 16 higher-level apprenticeship standards will be removed. This is a major shift intended to redirect investment toward entry-level roles. You can view the full list of impacted schemes on the official government interim guidance page.

• The Enrollment Window: Crucially, the Level 3 Team Leader/Supervisor and Level 5 Operations/Departmental Manager standards are included in this withdrawal. However, you can still enrol staff onto these programmes with full funding until September 2026. Any learner starting before this date will be funded through to the completion of their qualification.

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 the flexibility to upskill existing staff in weeks rather than years.

In a major boost, the government now covers 100% of training costs for apprentices under the age of 25 and awards a £2k incentive per enrolment to the employer. This allows SMEs to build a digital-native workforce with zero training costs. This is an ideal time to review your sales and commercial training needs to ensure your new hires are high-performing from day one.

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

The operational details of the Growth and Skills Levy are now live via the Apprenticeship Service. To stay ahead, your business should act on the following:

• Secure Management Training Now: If you have aspiring managers, enrol them in Level 3 or Level 5 standards before the September 2026 deadline to secure full funding before these pathways are withdrawn.

• Audit your expiry: Review your apprenticeship account monthly. With a 12-month clock, your 2026/27 spend strategy needs to be finalised immediately.

Pivot to "Youth Guarantee": Capitalise on the 100% funding for under-25s to bring in fresh talent. You can learn more about how to recruit and assess top talent through Pareto’s specialist services.

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, this new flexibility is your greatest asset—provided you move fast.

• For enterprises: The "use it or lose it" 12-month window demands a proactive strategy. The withdrawal of Level 3 and 5 funding in September means the clock is ticking on traditional leadership development.

• For SMEs: The "Youth Guarantee" is your open door. By securing 100% funding AND a £2k bonus 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. The deadline for funded management training is September 2026, make sure your people are on the list.   

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