Growth and Skills Levy 2026: what trade businesses need to know

The UK government has been overhauling how apprenticeship funding works. The Apprenticeship Levy — which applied to employers with a payroll of over £3 million a year — is being replaced by the Growth and Skills Levy. For most trade businesses, the direct impact of the levy itself is limited (you're unlikely to have a payroll over £3 million), but changes to how apprenticeship funding is distributed affect everyone who wants to take on an apprentice.

This article covers what the Growth and Skills Levy is, how it differs from the old Apprenticeship Levy, and what it means practically for a sole trader or small contractor looking to hire an apprentice in 2026.

What was the Apprenticeship Levy?

The Apprenticeship Levy was introduced in April 2017. Any employer with an annual pay bill of more than £3 million paid 0.5% of their total payroll into a digital account with the Education and Skills Funding Agency (ESFA), minus a £15,000 annual allowance. This money could only be used to fund apprenticeship training through approved providers.

Large employers — building firms, facilities management companies, housing developers — built up significant levy accounts. The problem was that many of them couldn't spend it fast enough on their own apprentices, so billions of pounds went unspent and returned to the Treasury. Small employers, meanwhile, accessed apprenticeship funding through a separate co-investment route, paying 5% of training costs themselves (later reduced to 5% then 0% for some groups).

What is the Growth and Skills Levy?

The Growth and Skills Levy was announced in the 2024 Autumn Budget as part of broader skills reform. The government's stated aim is to give employers more flexibility in how they use their levy contributions — not just for traditional apprenticeships but for a wider range of shorter skills training courses.

Key changes include:

• Shorter training courses eligible: Under the old levy, only apprenticeship frameworks (12 months minimum) could be funded. The Growth and Skills Levy opens this up to shorter courses, including training for existing staff.
• Flexible skills fund: Employers will be able to use a portion of their levy payment for non-apprenticeship training, subject to a list of approved qualifications.
• Sector-specific priorities: The government has indicated it wants to prioritise skills training in construction, engineering, and green energy — areas where there are known workforce shortages.

The full rollout is being phased. As of early 2026, the apprenticeship route continues to function largely as before for most employers, with expanded eligibility for some shorter courses coming in during 2026.

Does the Growth and Skills Levy affect small trade businesses directly?

If your annual payroll is under £3 million — which covers almost every sole trader, small contractor, and SME in the trades — you don't pay the levy yourself and won't have a levy account to manage. Your apprenticeship funding still comes through the non-levy route, which is funded by the government.

What does change for you:

• Government co-investment: Under the old system, non-levy employers paid 5% of apprenticeship training costs for most standards. Since 2023, the government increased its contribution so many SMEs now pay 0% — the government covers 100% of eligible training costs. This applies to most construction and trade apprenticeship standards.
• Wage costs are still yours: Apprenticeship funding only covers training. You still pay the apprentice's wage, which must be at least the national apprenticeship minimum wage (£7.55 per hour from April 2025 for those aged 16 to 18, or those in the first year of their apprenticeship). Check current rates at gov.uk.
• Incentive payments: The government offers a £1,000 incentive payment to employers hiring apprentices aged 16 to 18, or those with an education, health and care plan. This may be extended or revised as the Growth and Skills Levy is rolled out.

How to take on an apprentice as a small trade business

The process hasn't changed significantly for small employers:

1. Find an approved training provider. You can't deliver apprenticeship training yourself — you need to work with an external provider. The Find apprenticeship training tool on gov.uk lets you search by apprenticeship standard.
2. Choose the right apprenticeship standard. For the trades, the most relevant standards include Plumbing and Domestic Heating Technician (Level 3), Electrotechnical (Level 3), Bricklaying (Level 2), Carpentry and Joinery (Level 2/3), and Painting and Decorating (Level 2).
3. Create an apprenticeship service account. Non-levy employers reserve funding through the Apprenticeship Service on gov.uk. This is straightforward — the training provider will usually help you through the process.
4. Hire the apprentice. Advertise through the Find an apprenticeship service (free) or through the training provider directly.
5. Set up an apprenticeship agreement and commitment statement. These are the formal documents that set out what you and the apprentice agree to. The training provider will give you templates.

Costs and practical considerations for tradespeople

Wages

As noted above, apprenticeship funding covers training — not wages. You need to budget for the apprentice's pay throughout the apprenticeship, which typically lasts two to four years depending on the standard. A third-year apprentice plumber or sparky is usually significantly more productive than a first-year, so the wage cost becomes more justified over time.

Time

Apprentices need on-the-job supervision. If you're a sole trader, that means your own time. This is often the bigger hidden cost. Make sure you have enough work to keep an apprentice busy and someone who can supervise safely — particularly important for trades with safety requirements like gas, electrics, or working at height.

Day-release and off-the-job training

Apprentices must spend at least 20% of their working hours on off-the-job training. In practice, this usually means one day a week at college or a training centre. Factor this into your scheduling. It also means you can't count on having your apprentice available five days a week.

Redundancy and leaving mid-apprenticeship

If an apprentice leaves or you need to let them go, there are specific rules. The apprenticeship agreement gives apprentices certain protections during the duration of the apprenticeship. If you're making an apprentice redundant, you must follow the standard redundancy process. The training provider should be notified immediately so they can try to help the apprentice find a new employer to continue the apprenticeship.

Is taking on an apprentice worth it?

For most trade businesses, the answer is yes — eventually. The first year is the hardest because the apprentice is learning and isn't yet pulling their weight on the tools. By year two or three, a good apprentice is a genuine asset on the job. And once they're qualified, you've got a trained tradesperson who knows your systems, your standards, and your way of working.

The skills shortage in the trades is real. Gas Safe engineers, qualified electricians, and experienced plumbers are genuinely hard to find. Taking on apprentices is one of the few ways smaller trade businesses can build a reliable pipeline of skilled people rather than competing for experienced workers on the open market.

If you want to work out the cost of taking on an apprentice, use the day rate calculator to understand your labour costs, or the VAT calculator to check your VAT position as your business grows.

Construction Industry Training Board (CITB) levy

Separate from the Growth and Skills Levy, construction employers also need to be aware of the CITB levy. If your business is engaged in construction industry work and has an annual wage bill over £120,000, you pay a levy to the CITB — 0.35% for directly employed workers and 1.25% on labour-only subcontractors (LOSC payments). In return, you can claim grants for training and apprenticeships from the CITB.

Smaller construction businesses below the £120,000 threshold are exempt but can still access some CITB grants. Check whether you're registered and eligible at citb.co.uk.

Frequently asked questions

Do I have to pay the Growth and Skills Levy as a small business?

No. The levy only applies to employers with an annual payroll of over £3 million. Small trade businesses are not levy payers and access apprenticeship funding through the government's non-levy route instead.

How much does it cost to take on an apprentice as a sole trader?

The government covers 100% of the approved training costs for most trade apprenticeship standards for non-levy employers. Your main costs are the apprentice's wages (minimum £7.55 per hour in year one as of April 2025) and the time spent supervising them on the job.

Can I take on an apprentice if I'm a sole trader?

Yes. Sole traders can take on apprentices. You'll need an Apprenticeship Service account and must work with an approved training provider. The key constraint is that you need to have enough work and supervision capacity to support the apprentice throughout the programme.

What trade apprenticeship standards are available?

There are apprenticeship standards for most trades, including plumbing, electrical installation, gas engineering, bricklaying, carpentry and joinery, roofing, painting and decorating, heating and ventilation, refrigeration and air conditioning, and more. Use the Find apprenticeship training tool on gov.uk to see all available standards.

What is the difference between the Growth and Skills Levy and the Apprenticeship Levy?

The Growth and Skills Levy replaces the Apprenticeship Levy and gives large employers more flexibility to use their contributions for a wider range of training, not just traditional apprenticeships. For small non-levy employers, the practical change is gradual — the apprenticeship route continues largely as before, with some expanded options for shorter courses being phased in during 2026.