Employer Guide: Apprenticeship Levy & Funding Rules

Whether you are a corporate employer with a multi-million pound payroll or a small business looking to hire your first apprentice, understanding UK apprenticeship funding rules allows you to cost-effectively build, upskill, and retain talent.

1. Decoding the UK Apprenticeship Levy

Introduced to drive employer investment in technical training, the Apprenticeship Levy applies to all UK businesses across all sectors with an annual payroll exceeding £3 million.

Levy Calculation Formula

Levy-paying businesses pay 0.5% of their total annual paybill into an online Digital Apprenticeship Service (DAS) account, offset by a annual government allowance of £15,000.

  • 10% Government Top-Up: The UK government automatically adds a 10% top-up bonus to every monthly levy payment.
  • Expiry Window: Unspent levy funds expire after 24 months if not used for training.

Levy Transfer Provisions

Levy-paying employers can transfer funds to smaller businesses:

  • 25% Transfer Cap: Up to 25% of unused annual levy funds can be transferred to support supply-chain SMEs.
  • Strategic Value: Helps corporate businesses upskill suppliers and build regional partner networks.

Manage your corporate levy funding balance on the official GOV.UK Digital Apprenticeship Service Portal.

Use It or Lose It: Expired levy funds return to the Treasury to support apprenticeship training for non-levy small businesses. Plan your training intake ahead to maximize your Levy return.

2. Small Business (Non-Levy) Co-Investment Model

Businesses with an annual payroll under £3 million do not pay the Levy. Instead, they access government co-investment funding to cover candidate training:

Employer Profile Government Contribution Employer Contribution
Non-Levy SME (50+ Staff) 95% of total training & assessment costs 5% co-investment paid directly to training provider
Small Business (<50 Staff) hiring 16–18 Year Olds 100% fully funded by the government £0 co-investment payment required
Small Business (<50 Staff) hiring 19+ Year Olds 95% of total training & assessment costs 5% co-investment paid directly to training provider

3. Incentive Bonuses for Hiring Young Apprentices

The UK government offers additional financial incentives to employers hiring young people or care leavers:

£1,000 Young Person Incentive

Paid to employers for hiring an apprentice aged 16 to 18 years old (or aged 19 to 24 with an Education, Health and Care Plan). Paid in two equal instalments at month 3 and month 12.

Care Leaver Bursary Support

A additional bursary payment provided directly to apprentices who have spent time in local authority care, helping cover initial workplace equipment and travel costs.

4. Step-by-Step Hiring & Funding Process

Follow these simple steps to launch an apprenticeship position in your company:

1. Select Standard Choose an approved apprenticeship standard that meets your skill needs on the IfATE directory.
2. Partner Provider Partner with a registered training provider to deliver curriculum teaching and assess candidates.
3. Set Up DAS Account Create a Digital Apprenticeship Service account to manage funding reservations, approve provider payments, and post vacancies.