Growth & Skills Levy

Part of our topic guides on Government-Funded Data & AI Training and Data & AI Apprenticeships.

The Growth & Skills Levy is a UK tax on large employers' pay bills that funds apprenticeship training: 0.5% of any pay bill over £3 million, collected monthly through PAYE. It's the same mechanism as the former Apprenticeship Levy, now transforming from April 2026 to also fund shorter, more flexible training alongside full apprenticeships.

The simplest way to understand the levy is to follow a pound of it from your payroll to a training place, because at every stage of that journey there's a rule, a deadline, or a decision.

Where does the money come from?

From payroll, monthly, automatically. Any employer with an annual pay bill over £3 million pays 0.5% of it through PAYE, alongside tax and National Insurance. Every employer gets a £15,000 annual allowance that offsets the charge (connected companies share one allowance). If your pay bill is under £3 million you pay nothing, and the section on non-levy employers below is the one that matters to you.

The levy is collected UK-wide (tax is reserved policy), but the account you spend from only covers apprentices who live in England. Scotland, Wales and Northern Ireland receive a population-based share via the block grant and run their own, separate apprenticeship systems.

Where does it sit once collected?

In your Digital Apprenticeship Service (DAS) account, set aside month by month. If you run payroll for a business over the threshold, you're already paying this whether or not you've spent a penny of it: the account fills either way.

What can it buy, and what can it never buy?

Approved apprenticeship training and end-point assessment, including the data and AI standards. Never wages, travel or other employment costs. From 28 April 2026, the levy also starts funding short apprenticeship units, including three Level 5 AI leadership units. One carve-out worth knowing: from January 2026, Level 7 (Master's-level) apprenticeships aren't fundable for new starters aged 22 and over, not even from your own levy funds.

On those short units, our view is candid: the funding per unit is too low to deliver real quality, which in our view makes them dead in the water as a capability route, a narrow stopgap at best. A full apprenticeship, where a coach who's done the job takes someone from foundations to genuine competence, is what the levy is actually worth spending on. The levy is plumbing; what you build with it is the point.

When does it disappear?

On a rolling expiry. Funds paid in before 1 August 2026 last 24 months; funds paid in from 1 August 2026 last only 12. Unspent funds return to government. An unused levy pot is money quietly walking out the door, and the shortened expiry window makes the walk faster.

Before that happens you have two moves: spend the funds on apprenticeship training, or transfer up to 50% of your annual funds to another business. A transfer can cover an apprenticeship at a smaller employer in full, at no cost to them, which is how many SMEs fund places.

What if you never paid in?

A pay bill under £3 million makes you a non-levy employer, and the system still works for you: government co-investment covers the bulk of training costs, or a levy transfer from a larger employer can cover them entirely. Not paying the levy does not lock you out of funded apprenticeships.

Common questions

What's the difference between the Apprenticeship Levy and the Growth & Skills Levy?

Same tax, new name, wider job. The rate, the £3 million threshold and the monthly PAYE collection are all unchanged. What changes is what the money can buy: from April 2026 the levy starts funding shorter, more flexible training alongside full apprenticeships, beginning with apprenticeship units from 28 April 2026.

Can the levy fund AI and data skills training?

Yes: data and AI apprenticeships (data analyst, data engineer and the AI standards) are exactly the kind of training the levy exists to pay for. Three Level 5 AI leadership units are also fundable from 28 April 2026, with the caveat on unit depth above.

Who actually runs this system?

Standards are currently maintained by Skills England, and apprenticeship funding policy sits with the Department for Work and Pensions (DWP), following the machinery-of-government move from the Department for Education confirmed on 16 September 2025.