Apprenticeship funding rules explained

What is apprenticeship funding?

Apprenticeship funding is financial support given to employers towards the cost of training an apprentice. It is available to businesses of any size and could include direct government support for training costs or the apprenticeship levy (for large companies). In some cases, grants and local government funding are also available to help fund apprentice training (e.g., if an apprentice is a care leaver). There is no upper age limit for apprentices.

Apprenticeship funding rules vary year to year, so businesses must stay updated to understand eligibility criteria and available funding. Training providers like Logic4training can help to understand the ins and outs of apprenticeship funding and provide support in applying for it.

What is the apprenticeship levy?

The apprenticeship levy is a tax on large employers that they can invest in workplace training. It was introduced by the UK government in 2017 for employers with a payroll of over £3 million to stimulate investment in high quality training and skills. Levy paying employers contribute 0.5% of their payroll to a ‘digital apprenticeship account’ and the government adds a 10% top up, which can then be used to fund apprenticeship training.

Businesses that do not meet these requirements are exempt from paying the levy, but they can still benefit from it by receiving a levy transfer. However, non levy-paying businesses can still benefit from funding for apprenticeship training.

What can the apprenticeship levy be used for?

Apprenticeship levy funding can only be used to fund high quality apprenticeship training and assessment, through an approved training provider. Funds can be spent on tuition, certification and resources, but not on wages or expenses, such as travel.

There are almost 650 different types of apprenticeships, covering all sectors and levels. Level 2 are roughly equivalent to GSCEs while Level 6 and 7 apprenticeships result in a bachelor’s or master’s degree. Most building services engineering apprenticeships, for example, Gas Engineering Installer, are Level 3, equivalent to A Level study.

Who pays the levy?

The apprenticeship levy is mandatory for all UK employers with an annual wage bill of £3 million or more, which accounts for around 2% of British businesses. The apprenticeship levy is calculated at 0.5% of a company’s payroll, but most companies have nothing to pay as they fall under the £15,000 levy allowance. For example:

A business with a payroll of £3 million would have a £15,000 liability (0.5% of £3 million = £15,000). Applying the levy allowance, there would be nothing to pay.

A business with a payroll of £4 million would have a liability of £20,000 (0.5% of £4 million = £20,000). Applying the levy allowance of £15,000, the business would have to pay £5,000 into the pot. With the government 10% top up, they would have £5,500 to invest in apprenticeships.

What is the annual wage bill?

The annual wage bill is the total of all payments to employees that are subject to Class 1 secondary National Insurance contributions over a year, including wages, bonuses and commissions.

However, the levy is paid monthly, with the apprenticeship levy allowance of £15,000 split across 12 months. Therefore, employers only need to pay the apprenticeship levy if their liability is more than £1,250 in a month. Any unused allowance can be carried over to the next month within a tax year, but it must be used up within 24 months.

Find out more about receiving an apprenticeship levy transfer

What are the benefits of levy transfers for large businesses?

Apprenticeship levy transfers offer big companies the opportunity to support skills development throughout their sector and address skills gaps. This ‘bottom up’ approach is particularly important in the construction sector and building services industry, which urgently needs to recruit new entrants and develop existing skills to meet the challenges of the low carbon future.

Supporting local businesses is also a great PR exercise for everyone involved. By making connections with businesses in your sector and working together to develop skills, companies large and small can create positive news stories, case studies and social media content.

Does the government pay for apprentices?

Yes, the government contributes towards the cost of apprenticeship training for all employers, regardless of size and whether they pay the apprenticeship levy, including assessment, certification and training modules. The government does not pay for apprenticeship wages, ‘top up’ qualifications or businesses expenses, such as travel or accommodation costs.

Is apprenticeship funding available for SMEs?

There are several apprenticeship funding opportunities for SMEs in the construction sector and building services industry:

Employer contribution

For the 98% of UK businesses that do not pay the apprenticeship levy, the government will share the cost of apprenticeship training and assessment. Businesses are required to cover up to 5% of the cost, depending on the apprentice’s age, learning needs and background. An additional grant is available to help employers support young apprentices and those with additional needs

Levy transfer

SMEs can also apply for funding from a levy paying business to cover 100% of their training costs.

Construction Industry Training Board (CITB)

Grants to help build core construction skills, including overnight stays and travel expenses.

Charitable support

Apprentices may be eligible for further support from charities, such as Rainy Day Trust, who provide funding for tools, safety equipment and transport for those working in the domestic residential market.

National Insurance exemption

further financial support is available through Class 1 National Insurance exemptions for some apprentice employers.

Explore apprenticeship funding options for employers

Apprenticeship funding rules 2024/25

Funding support is outlined in the 2024-2025 Apprenticeship Funding Rules which apply to apprenticeships starting between August 2024 and July 2025.

If an employer has under 50 employees and the apprentice is under 21, the government will fund 100% of apprenticeship training costs. Additionally, incentive payments of £1,000 (paid in two instalments) are available to assist with onboarding for young apprentices and those who require additional support.

For non-levy paying businesses that fall outside of these criteria, SMEs are required to contribute 5% of the cost of training an apprentice. Additional support may be available via a levy transfer to cover the entire cost of training.

Funding for apprentices over 21

Apprenticeships have no upper age limit. Employers who hire an apprentice aged 21 or over (or 24 if the apprentice has an EHCP plan) can benefit from the co-investment model, where the government pays 95% of training costs. They can also apply for a levy transfer.

Apprenticeship wage 2024

Apprentices are entitled to be paid the national minimum wage by their employer, which is not covered by apprenticeship funding.

The apprentice rate for 2024 for apprentices aged under 19 or over 19 and in their first year of employment is £6.40, rising to £7.55 from April 2025.

Apprentices aged 19 or over who have completed their first year of employment are entitled to the National minimum wage for their age group:

• 18 – 20 – £8.60 rising to £10 in April 2025
• 21 and over – £11.44 rising to £12.21 in April 2025

Funding your apprenticeship with Logic4training

We have the expertise and industry experience to support employers through all aspects of the apprenticeship process:

• Recruitment of an apprentice
• Tailored apprenticeship training programme that suits your needs
• Completion of compliance paperwork
• Funding support

We are here to make the process as easy as possible for employers.

Contact us to find out more.