The government has formally recognised that the Apprenticeship Levy has not worked well for a large part of the market, particularly fast growing and tech led businesses.
In response, the levy is being reformed and expanded into the Growth and Skills Levy. The intention is to create a more flexible system that better supports how organisations build skills, develop talent and invest in innovation.
For tech businesses, this is a meaningful shift. Apprenticeships remain central, but they are no longer the only option, and the system is being redesigned to reflect how modern teams actually operate.
Summary: the key changes at a glance
The Growth and Skills Levy gives employers more flexibility in how levy funding can be used to build skills and capability.
Alongside apprenticeships, new options are being introduced, including foundation apprenticeships for early career talent and short, modular apprenticeship units from April 2026, focused on priority skills such as digital and advanced AI.
Several rules have already changed. Apprentices aged 19 and over no longer need formal English and maths qualifications to complete an apprenticeship. The minimum apprenticeship duration has reduced from 12 months to 8 months where appropriate, and assessment is being streamlined to better reflect real work.
From 2026 onwards, funding is being refocused towards young people and early career routes, with changes to Level 7 eligibility, levy expiry periods and co investment rates.
What is the Growth and Skills Levy?
The Growth and Skills Levy builds on the existing apprenticeship levy, introduced in 2017 for employers with an annual pay bill over £3 million. Those employers continue to contribute 0.5 percent of payroll, and the funding continues to support apprenticeship training across businesses of all sizes, including SMEs.
What changes is how that funding can be used.
The Growth and Skills Levy is designed to provide a broader and more flexible offer, supporting high quality skills development in work and helping businesses respond more quickly to changing workforce needs.
The different ways levy funding can be used
Apprenticeships
Apprenticeships remain a core part of the system. They are paid jobs that allow individuals to earn while they learn, developing the knowledge, skills and behaviours required for a specific role.
Apprentices are employed like any other member of staff and trained in a way that aligns to business needs. There are hundreds of apprenticeship standards available across sectors including digital, engineering, finance and professional services.
Foundation apprenticeships
Foundation apprenticeships are a new entry level route aimed primarily at young people at the start of their careers.
They are paid roles with structured training at Level 2, designed to build employability skills, confidence and real workplace experience. Importantly, they offer a clear progression pathway into more advanced apprenticeships.
The first foundation apprenticeships launched on 1 August 2025 across sectors including digital, engineering and manufacturing, construction, and health and social care. Further standards are being developed by Skills England.
Apprenticeship units from April 2026
From April 2026, employers will be able to use levy funding on short, flexible training, known as apprenticeship units.
These units are built from existing apprenticeship standards and are designed to help businesses respond quickly to evolving skills needs without committing to a full apprenticeship. The first wave will focus on priority areas including digital, advanced AI and engineering.
Further detail on apprenticeship units will be published as the rollout progresses.
Key rule changes employers should be aware of
Apprentices aged 19 and over are no longer required to achieve formal English and maths qualifications to complete an apprenticeship. Instead, these skills are demonstrated through real work tasks. Apprentices aged 16 to 18 will still need to achieve English and maths qualifications, with funding remaining available where employers choose to include them.
The minimum duration of an apprenticeship has reduced from 12 months to 8 months where appropriate. Typical durations still apply, but this allows faster progression where individuals have prior learning or where roles demand quicker competence.
Assessment is also being streamlined. Changes include more proportionate assessment, the ability for assessment activity to take place during the programme, and greater flexibility in how assessment is delivered, while maintaining oversight and quality.
Changes to Level 7 apprenticeships and funding
From 1 January 2026, government funding for Level 7 apprenticeships will be limited to individuals aged 21 and under, or under 25 for care leavers and those with an Education, Health and Care Plan. Anyone who started a Level 7 apprenticeship before this date will continue to be funded through to completion.
From the 2026 to 2027 academic year, further funding changes come into effect. These include the removal of the 10 percent levy account top up, a reduction in levy fund expiry from 24 months to 12 months, and a change to the co investment rate once levy funds are exhausted. At that point, the government will fund 75 percent and levy paying employers will contribute 25 percent.
What this means for tech businesses
For tech employers, the Growth and Skills Levy introduces far greater flexibility in how skills funding can be used.
It creates new opportunities to upskill existing teams, build junior talent pipelines, invest in digital and AI enabled capability, and design progression routes that fit how modern tech teams actually deliver.
The shift is away from a single prescribed route and towards blended, scalable approaches to building capability over time.
How Manchester Digital can help
Manchester Digital supports tech businesses across growth, talent, skills and innovation. Because we sit inside the ecosystem, we help companies translate these changes into practical action.
That might mean understanding where levy funding can be used effectively, designing the right mix of apprenticeships and modular learning, or building junior talent that can move into production faster.
If maximising the value of your levy contributions appeals to you and you want to explore how the Growth and Skills Levy could support your business, get in touch.
You can contact the team via our enquiry form or email emma@manchesterdigital.com to start a conversation about your priorities.
