How the Apprenticeship Levy is changing in 2025

If you’re a UK business owner, you’ve likely come across the Apprenticeship Levy. If you’ve not heard of it, it’s a scheme designed to fund apprenticeship training.

However, in 2024, the Government announced some transformative changes.

The levy will soon become the Growth and Skills Levy, backed by a £40m investment. These updates aim to make training and development more accessible and impactful for businesses of all sizes.

In this article is everything you need to know about these changes, and how they may affect you and your business.

Here’s what we cover:

What is the Apprenticeship Levy?

Introduced in 2017, the Apprenticeship Levy is a tax on UK employers with an annual pay bill exceeding £3m.

It requires these businesses to contribute 0.5% of their payroll to fund apprenticeship training.

Smaller businesses that don’t meet the threshold can access government-subsidised funding through a co-investment model.

This is where the government covers 95% of training costs, leaving the business to pay the remaining 5%.

While the scheme aimed to upskill the workforce and encourage investment in training, its rigid structure led to criticism.

Many businesses found it difficult to make full use of their levy funds before they expired, resulting in unused contributions being redirected to a broader government pot.

How does the levy work now?

Currently, businesses eligible for the levy must create an Apprenticeship Service account to manage their funds.

These funds are only accessible for 24 months and can only be used for training provided by approved apprenticeship providers.

Businesses that are unable to use their funds within the 24 months lose them. And this has caused frustration for many employers.

For smaller businesses, the co-investment model limits the financial burden of training, but the bureaucratic processes can still be daunting.

The focus on traditional apprenticeships has also been a point of contention for businesses looking for more diverse training options.

What’s changing in 2025 and what is the Growth and Skills Levy?

The Prime Minister announced plans in September 2024 to transform the Apprenticeship Levy into the Growth and Skills Levy.

While some changes are expected to begin in 2025, the full implementation timeline is still being determined.

Here are the key changes:

1. Broader training options

Businesses will be able to use levy funds for a wider range of training programmes, including shorter courses and upskilling initiatives, not just traditional apprenticeships.

This flexibility is designed to address the specific needs of individual businesses and industries.

2. Simplified processes for smaller businesses

The co-investment model will remain but the Government plans to reduce red tape, making it easier for smaller businesses to access and utilise funding.

3. Regional skills alignment

The new scheme will encourage businesses to invest in training aligned with local skills gaps, fostering stronger regional economies and a more resilient workforce.

4. Focus on growth sectors

Specific incentives will support training in high demand and growth industries, helping businesses prepare for future market needs.

Why are these changes significant?

For businesses, the revamped levy gives businesses an opportunity to approach their training and development with greater flexibility and strategic focus.

Here’s how these changes can benefit your business:

• Tailored training: with more options available, you can choose programmes that directly address your workforce’s needs. Up to 50% of levy funds may be allocated to non-apprenticeship training, allowing for both short-term skills development and long-term strategic upskilling.
• Streamlined processes: smaller businesses in particular stand to benefit from reduced administrative burdens, freeing up time and resources for other priorities.
• Community impact: by aligning training with regional skills gaps, businesses can contribute to the development of local economies while securing a skilled workforce.

The introduction of growth sector incentives is also notable.

For example, businesses in renewable energy could use their funds to upskill workers in green technologies, while tech companies might invest in AI and data analytics training.

This alignment with market trends means that businesses stay competitive.

What does this mean for businesses?

If you’re a small or medium-sized business, these changes could reinvigorate how you approach workforce training.

Some of the key benefits include:

• Greater flexibility: tailored training options mean you can address immediate needs or invest in long-term skill development.
• Simpler access: less bureaucracy means more time to focus on growth rather than navigating complex systems.

The reduction in red tape and simplified access to funding will make a significant difference, with businesses able to allocate funds to train employees in digital marketing or operational efficiencies without wading through endless paperwork.

Benefits to employees

The new levy stands to benefit employees significantly. With a broader range of training options, employees can:

• Access diverse learning opportunities: shorter courses or upskilling programmes make professional development more attainable.
• Enhance career progression: employees gain skills that are directly relevant to their roles, boosting job satisfaction and retention.
• Adapt to future trends: training aligned with growth sectors equips employees with tools to succeed in evolving markets.

For employees, this could mean moving beyond traditional apprenticeship models into training that opens doors to leadership roles, cross-functional expertise, or niche industry certifications.

Key dates to keep in mind

• Since end of 2024 to early 2025: consultations with businesses and industry experts will refine the Growth and Skills Levy framework.
• April 2025: the updated scheme is set to roll out, bringing with it new guidelines and opportunities.

How to prepare for the new levy

To maximise the benefits of these changes, start preparing now. Here are six practical steps:

1. Assess your training needs

Review your workforce’s skills and identify areas where training could add value. Consider how new, flexible options could support your goals.

2. Engage in the consultation process

Participate in consultations—this is your opportunity to provide input on how the scheme can meet your business’s needs.

3. Stay informed

Keep up-to-date with announcements about the Growth and Skills Levy by following trusted sources such as the government website.

4. Engage with training providers

Start exploring relationships with local and national training providers to identify the best options for your business.

5. Plan your budget

Collaborate with your finance team or accountant to make sure you’re ready to allocate funds effectively under the new scheme.

6. Communicate with your team

Discuss upcoming changes with your employees to highlight new opportunities for development and growth.

Final thoughts

The introduction of the Growth and Skills Levy represents a significant shift in how businesses can invest in their workforce.

By offering greater flexibility, extended timelines, and streamlined processes, this updated scheme gives you the power to focus on building a skilled and adaptable team.

Whether you’re a small business aiming to upskill your employees or a larger organisation preparing for future challenges, the Growth and Skills Levy is a chance to rethink your approach to training.