What is the apprenticeship levy and how do I know if my business pays it?

The apprenticeship levy is a charge of 0.5% on an employer’s annual pay bill if that bill is over £3 million. If your pay bill exceeds £3 million you will pay the levy and receive funds in an apprenticeship service account that you can spend on approved training and assessment.

If my business doesn’t pay the levy, how much will apprenticeships cost us?

If you don’t pay the levy the government normally covers 95% of the approved training and assessment cost and you pay the remaining 5%, up to the funding band maximum. Note that apprentices who started before 1 April 2019 still follow the old rate where the employer contributes 10% and the government pays 90% until completion.

How do I pay for training and manage apprenticeship funding?

You must agree a payment schedule with your chosen training provider and pay them directly for training and assessment. Use your apprenticeship service account to manage funding, set up payments and track spending with your provider.

What can levy funds be used for and what can’t they pay for?

Levy funds may be used to pay for approved apprenticeship training and end-point assessment only. They cannot be used for apprentice wages, travel costs, non-approved qualifications or services from a flexi-job apprenticeship agency.

Can I transfer unused levy funds to other employers and how long do funds last?

Yes — levy-paying employers can transfer up to 50% of unused funds to other employers to help wider training needs. Unused levy funds are removed from your account after 24 months, although they are then used within the wider apprenticeships budget.

Are there incentive payments to help with other costs and how do I claim them?

There are extra incentive payments available to help support apprentices in the workplace, including lump sums for certain eligible apprentices. Eligibility rules vary, so check the official gov.uk guidance or speak to your training provider to confirm which payments you can claim and how to apply.

How can VQ Solutions help my business set up apprenticeships and access funding?

VQ Solutions can guide you through choosing the right apprenticeship standard, finding and agreeing terms with a training provider, managing the apprenticeship service account and claiming incentives. They can also help you complete funding paperwork and set up payment schedules to make the process simpler.

Apprenticeship Funding: A Guide for Employers

Apprenticeships give you a practical way to grow skills in your business. They let people earn while they learn. The government helps pay for the training. This guide explains what funding and incentives you can get. It shows the steps to take and practical tips for employers. VQ Solutions has helped many employers access funding and set up apprenticeships. We can help you too.

How apprenticeships are funded and what the apprenticeship levy is

Apprenticeship Funding comes from two main places. The government pays most of the training cost. Employers either pay the apprenticeship levy or they do not. The levy is a charge on larger employers. If your annual pay bill is over £3 million you pay the levy at 0.5%. Levy-paying employers get funds in an apprenticeships service account. You can use that money for training and assessment.

If you do not pay the levy, the government will usually pay 95% of the training and assessment cost. You will pay the remaining 5%. The exact amount you or the government pay depends on the funding band for the apprenticeship. Funding bands set the maximum the government will pay for each apprenticeship type.

If you do not pay the apprenticeship levy

If your business does not pay the levy you normally pay 5% of the training and assessment cost. The government pays the other 95% up to the funding band maximum. You must:

agree a payment schedule with your training provider
pay the training provider directly for training and assessment

Note: If your apprentice started before 1 April 2019 you contribute 10% and the government pays 90%. That rate continues until the apprentice completes their training. Use your apprenticeships service account to manage funding and provider payments.

Some apprentices may be fully funded. This depends on your circumstances and the apprentice’s status. Check the official funding rules to see if you qualify.

If you pay the apprenticeship levy

If you pay the levy you will have funds in an apprenticeships service account. You can spend these funds on apprenticeship training and assessment. The government will add 10% to the funds you spend. Use your apprenticeships service account to manage funding and to pay providers.

You cannot use funds from your account to pay a flexi-job apprenticeship agency for their services. Levy funds also cannot pay apprentice wages, travel costs, or non-approved qualifications.

If you have unused levy funds you can transfer up to 50% to other employers. This helps smaller businesses access training. Unused levy in accounts is removed after 24 months but is used by the wider apprenticeships budget.

Help to pay for other costs (incentives)

There are extra payments to help you support apprentices in the workplace. These incentives aim to reduce barriers and encourage employers to take on apprentices.

You can get £1,000 to support the apprentice if, at the start of training, they are one of the following:

16 to 18 years old (or 15 if their 16th birthday falls between the last Friday in June and 31 August)
19 to 24 years old with an Education, Health and Care (EHC) plan
19 to 24 years old and have been in care

You may spend this £1,000 on salary, travel, uniform, or any work-related cost. The provider will pay you once they confirm eligibility. Payments come in two instalments of £500:

first payment: 90 days after the apprenticeship starts
second payment: one year after the apprenticeship starts

Training providers must pay you within 30 working days of receiving the funds. You only get paid if the apprentice is still employed by you when each payment is due. If the apprentice has an EHC plan or has been in care, the training provider must get the apprentice’s agreement before sharing that information with you or making payments.

Foundation apprenticeships and the £2,000 support

If you take on a foundation apprenticeship you may get up to £2,000 to support the apprentice. This applies if the apprentice is one of:

16 to 21 years old
22 to 24 years old with an EHC plan
22 to 24 years old and have been in care
22 to 24 years old who are in prison or leaving prison

Foundation apprenticeships cover areas such as construction, engineering, health and social care, and digital. You can use the money for any work-related cost.

Payment is in three instalments:

£667 — 90 days after the apprenticeship starts
£667 — 242 days after the apprenticeship starts
£666 — 90 days after the apprentice moves on to their next apprenticeship

Again, training providers must pay you within 30 working days of receiving the money. You only receive payments if the apprentice is still employed at each payment date. The provider must have the apprentice’s consent before sharing EHC or care information.

Practical steps for employers

Follow these steps to make funding simple and secure:

Check if you pay the apprenticeship levy. If your annual pay bill is over £3 million you pay the levy.
Set up an apprenticeships service account if you do not already have one. This is where levy funds sit and where payments are managed.
Choose an approved training provider. Agree a contract and a payment schedule.
Check funding band and cost for the apprenticeship standard you want. Ask your provider to confirm the funding band.
Ask about extra incentives. Tell the provider if the apprentice is eligible for the £1,000 or £2,000 payments.
Keep the apprentice employed at the payment dates to receive employer support payments.
Keep clear records and evidence of training, completion, and eligibility.

VQ Solutions can advise on steps 3–6. We help you agree the right plan with a training provider.

Common questions employers ask

Can I use levy funds for wages? No. Levy funds pay only for training and assessment.
What if an apprentice leaves before 90 days? You will not get the first £500 payment. Payments are tied to the apprentice still being employed on the due date.
Can I transfer levy funds to another business? Yes. You can transfer up to 50% of your levy funds to other employers.
Is there help for small businesses? Yes. Small employers pay 5% of training costs and the government pays the rest. There are also incentive payments for hiring young people and care leavers.

Conclusion — next steps and where VQ Solutions can help

Apprenticeships offer a cost-effective way to grow talent. Funding and incentives reduce your training costs. They also help you support young people and learners with additional needs. Start by checking whether you pay the apprenticeship levy. Set up or use your apprenticeships service account. Agree payment schedules with your training provider and check eligibility for the £1,000 and £2,000 support.

If you want practical advice, VQ Solutions can help you design a funded apprenticeship plan. We guide you through funding rules, payments, and provider agreements. Contact VQ Solutions to discuss how Apprenticeships, Funding and government Incentives can work for your business.