Key Takeaways:
- Employers may pay 25% of training costs for apprentices aged 25 and older.
- The proposed changes aim to reverse a 40% decline in youth apprenticeship starts.
- The government is considering introducing the changes from September 2027.
The proposed UK apprenticeship levy changes could require employers in England to pay 25% of training costs for apprentices aged 25 and older, redirecting funding toward younger workers amid rising youth unemployment.
UK apprenticeship levy changes target youth training
The proposed changes would overhaul the £4 billion-a-year growth and skills levy, which funds apprenticeships across England. Under the plan, levy funds would cover eligible training costs for apprentices aged 16 to 24, while employers would pay 25% of training costs for apprentices aged 25 and older.
The government is considering a phased introduction beginning in September 2027, according to The Guardian, which first reported the proposal. Ministers have not announced a final decision.
The plan aims to reverse a 40% decline in youth apprenticeship starts over the past decade. More than half of new apprenticeship starts now involve people older than 25, while enrollment among those younger than 19 has nearly halved in 10 years.
The proposal forms part of the government’s broader response to rising youth unemployment. Nearly 1 million young people are not in education, employment or training, increasing pressure on ministers to improve access to entry-level jobs and vocational training.
UK Apprenticeship Levy Changes Could Shift Employer Spending
Under the existing system, large employers with annual payroll costs exceeding £3 million pay 0.5% of their total pay bill into a dedicated digital account. They can use those funds to cover eligible apprenticeship training and assessment costs.
Labour revamped the apprenticeship levy earlier this year to give businesses greater flexibility over training. The changes expanded the scheme to include foundation apprenticeships and shorter courses.
The proposed co-investment rule would limit that flexibility by requiring employers to contribute toward training for older apprentices, while preserving full levy funding for eligible apprentices aged 16 to 24.
The change could prove controversial because successive governments have encouraged employers to decide how to spend their levy funds. A senior policy expert close to the government told The Guardian: “Employers are not going to like it.”
The expert added that businesses had been told they could decide how to use the money, but argued that the current system was not working.
Ministers are also weighing the financial pressure on businesses. Employers have pushed back against higher employment costs, including changes to national insurance contributions, and are seeking additional support to hire younger workers.
Ministers face pressure to deliver results
The proposed levy changes come as the government faces questions about its progress on youth employment. Official figures show Labour’s foundation apprenticeship scheme enrolled 160 young people in its first eight months, far below its target of 30,000 starts over the course of the parliamentary term.
The Fabian Society think tank has called for the levy rate to rise from 0.5% to 0.7%, a move it says could raise an additional £2.5 billion for targeted skills funding. However, ministers are wary of imposing further costs on businesses amid pressure on public finances.
The government has also announced plans to create 50,000 additional apprenticeships for young people and introduce a £2,000 hiring payment for small and midsize businesses that recruit apprentices aged 16 to 24.
A Department for Work and Pensions spokesperson said the government remained committed to addressing the decline in youth apprenticeship starts and equipping young people with the skills needed to succeed.
The spokesperson added that the government would not pre-empt the findings of Alan Milburn’s review into why so many young people are out of work. The review’s final report has been delayed until after the budget.
Chancellor John Healey is preparing a tax and spending statement expected to include measures addressing youth unemployment. The proposed UK apprenticeship levy changes offer ministers a way to redirect existing funding toward younger workers without immediately increasing public spending.