The UK Government has announced a series of significant changes to the apprenticeship system that will affect how employers recruit, train, and fund apprentices. Information shared by the UK Fashion and Textile Association (UKFT) highlights several reforms designed to increase opportunities for young people while encouraging employers to take a more strategic approach to skills development.
The changes, many of which will take effect from April and August 2026, include new funding rules, higher apprentice wages, and expanded training opportunities.
Below is an overview of the key changes and what they mean for employers.
Full Funding for Apprentices Under 25 in SMEs
From August 2026, training costs for apprentices under the age of 25 employed by non-levy paying employers (SMEs) will be fully funded by the government.
This removes the current co-investment requirement, where smaller employers typically pay a percentage of apprenticeship training costs. The policy builds on the 2024 reform that removed co-investment for apprentices under 22.
This change significantly lowers the financial barrier to hiring apprentices. Small and medium-sized businesses will be able to recruit and train young people without paying training costs, making apprenticeships a far more accessible route for workforce development.
For many SMEs, this could create a valuable opportunity to bring in new talent and support long-term skills development.
Changes for Levy-Paying Employers
Large employers who pay the apprenticeship levy will also see changes to how their funding operates.
Key updates include:
- The 10% government top-up on levy contributions will be removed.
- Employers will only be able to spend the funds they pay into the levy.
- Levy funds will now expire after 12 months, rather than the current longer window.
- Once levy funds are exhausted, employers will need to contribute 25% of training costs, with the Department for Education funding the remaining 75%.
These changes encourage organisations to plan their apprenticeship strategy more carefully and ensure funds are used efficiently. Employers may need to work more closely with training providers to maximise the impact of their levy spending.
Streamlining Apprenticeship Standards
The government plans to review and rationalise apprenticeship standards with very low uptake.
A smaller and more focused list of apprenticeship programmes should reduce complexity for employers and ensure training aligns with real labour market demand. Employers should see a clearer and more relevant set of options when choosing apprenticeship programmes.
Increase in the Apprentice Minimum Wage
From 1 April 2026, the apprentice rate under the UK Government’s National Minimum Wage framework will increase.
New rates include:
- £8.00 per hour – apprentices under 19 and those aged 19+ in their first year
- £10.85 per hour – 18–20 year olds after completing the first 12 months
- £12.71 per hour – apprentices aged 21+ after completing the first 12 months
Higher pay is expected to improve recruitment and retention, making apprenticeships more attractive to young people and helping employers compete for emerging talent.
Youth Guarantee Initiative
A major government investment of £820 million over three years will fund the Youth Guarantee, ensuring that every young person aged 18–21 has access to:
- College education
- Apprenticeships
- Personalised job support
Young people who have been unemployed for 18 months will be offered paid work rather than remaining on benefits.
The aim is for employers to gain access to a larger pool of motivated candidates, many of whom will be supported through government-funded employment and training programmes.
Additional Support for NEETs
The reforms also target young people classified as NEETs (Not in Education, Employment or Training).
The government plans to provide:
- 350,000 training or workplace opportunities
- 55,000 subsidised jobs for 18–21 year olds
- 360 new Youth Hubs offering careers advice, CV support, housing guidance and mental health support
Employers in sectors experiencing labour shortages, including construction, hospitality, and health and social care, will benefit from government-backed recruitment pipelines.
Expansion of Apprenticeships and New Skills Investment
Further investment is being directed into expanding apprenticeship opportunities and training in high-demand sectors.
Key initiatives include:
- £725 million investment to create approximately 50,000 additional apprenticeships
- Expansion of foundation apprenticeships into hospitality and retail, alongside existing sectors such as construction, digital, engineering, manufacturing, and health and social care
- A £140 million pilot programme connecting young people with local employers through mayoral initiatives
- New short courses from April 2026 in AI, engineering, and digital skills
Employers will gain access to more specialised training programmes, enabling them to upskill employees in areas critical to future competitiveness, particularly in digital and technology-driven industries.
What These Changes Mean for Employers
SMEs
For smaller employers, the new funding model presents a major opportunity to recruit apprentices without training costs, making apprenticeships a highly attractive workforce development tool.
Levy-Paying Employers
Large organisations will need to adopt more strategic planning, ensuring their levy funds are used within the new 12-month timeframe and aligned with business priorities.
All Employers
Across the board, businesses will benefit from a broader and better-supported talent pipeline, as government investment drives skills development in key growth sectors.
How Employers Can Prepare
To make the most of these reforms, employers should begin planning now:
Plan early
With levy funds expiring after 12 months, forward planning will be essential.
Work with training providers
Strong partnerships can help ensure employers maximise the return on their apprenticeship investment.
Review workforce needs
Identify skills gaps where apprenticeships could support future growth, particularly in areas such as digital skills, engineering, and hospitality.
Use government-backed schemes
Subsidies and youth employment initiatives provide an opportunity to recruit motivated young people at a lower cost.