What the New Budget Means for Employers Considering Apprenticeships
The government’s latest budget announcements have introduced some significant changes for apprenticeships—changes that could make recruiting and developing young talent easier and more affordable for employers of all sizes. At present these changes have been announced and will be implemented in 2026 but no dates have been set yet.
At Elevated Knowledge, we know how important it is for businesses to understand the real financial impact of these reforms, so here’s a clear breakdown of the announcements what’s changing and what it means for you.
- Co-Investment Scrapped for Under-25s: Big Savings for SMEs
One of the headline announcements comes from Chancellor Rachel Reeves: apprenticeship training for under-25s will now be completely free for small and medium-sized employers.
Until now, SMEs have had to contribute 5% of the training cost through co-investment (reduced to 0% for apprentices under 22 in 2024). That co-investment relief will now be extended to apprentices aged 22 to 24, meaning SMEs can take on young apprentices without paying any training contribution at all.
What we know:
- Applies to apprentices under 25
- Extends previous relief for under 22s
- Implementation date still to be confirmed (either immediate or April 2026)
- Funded by an additional £725 million invested in apprenticeships for young people
What this means for employers:
If you’re an SME, hiring a young apprentice could cost significantly less—and in many cases, nothing at all in training fees.
- £820 Million “Youth Guarantee” to Boost Young Talent
The government has announced an £820 million programme over three years to create a “youth guarantee” for 18–21-year-olds. This guarantee aims to ensure every young person has access to:
- A place in college
- An apprenticeship
- Personalised job support
And after 18 months, young people will be offered paid work, not benefits.
What this means for employers:
The talent pipeline for entry-level skilled roles is likely to grow substantially. Employers could benefit from increased availability of motivated young people supported by this national initiative.
- Major Changes for Levy-Paying Employers
For larger employers paying the apprenticeship levy, the system will undergo several changes as it transitions to a new “growth and skills levy” in April 2026.
Key changes include:
- Removal of the 10% government top-up to levy accounts
- Levy funds will expire after 12 months, instead of the current 24
- Once levy funds are used, the employer co-investment rate rises to 25% (up from 5%)
What this means for levy payers:
These reforms encourage quicker use of apprenticeship funds and may increase employer contributions if internal demand for training is high. Early planning will be essential.
- Minimum Wage Increase for Apprentices
From April, minimum wages for apprentices and young workers will increase:
- Apprentices under 19 / in their first year: £8.00 per hour (up from £7.55)
- 18–20-year-olds: £10.85 per hour
- 21+ National Living Wage: £12.71 per hour
What this means for employers:
Budgeting for new apprentices should now factor in these updated wage rates.
- Levy Income Set to Rise – But Funding Pressures Remain
The apprenticeship levy is forecast to raise:
- £4.4bn in 2025–26
- £4.6bn in 2026–27
- £5bn by 2029–30
Despite this growth, England’s apprenticeship budget is already under pressure and was overspent last year. Sector leaders are calling for more of the levy’s “top-slice” to be reinvested directly into training delivery.
What Should Employers Do Next?
These announcements collectively present major opportunities—particularly for SMEs looking to bring in younger talent at minimal cost. However, the changes also raise questions around:
- Timing of implementation
- Financial planning
- Workforce development strategies
- Navigating levy vs. non-levy pathways
At Elevated Knowledge, we’re here to help employers make sense of these reforms and understand the real financial implications for their business.
If you’re considering taking on an apprentice—or simply want clarity on how the new budget affects your organisation—please get in touch with us. We’re always happy to talk through your options and help you make the most of the government support available.
