The Growth and Skills Levy: What UK Businesses Need to Know

If you’re a UK business owner, or part of the Learning and Development team in a business you’ve likely come across the Apprenticeship Levy. If not, it’s a scheme designed to fund apprenticeship training.

However, in 2024, the government announced some transformative changes. The levy will soon become the Growth and Skills Levy, backed by a ￡40m investment. These updates aim to make training and development more accessible and impactful for businesses of all sizes.

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What is the Apprenticeship Levy?

Introduced in 2017, the Apprenticeship Levy is a tax on UK employers with an annual pay bill exceeding ￡3m. It requires these businesses to contribute 0.5% of their payroll to fund apprenticeship training.

Smaller businesses that don’t meet the threshold can access government-subsidised funding through a co-investment model, where the government covers 95% of training costs, leaving the business to pay the remaining 5%.

While the scheme aimed to upskill the workforce and encourage investment in training, its rigid structure led to criticism. Many businesses found it difficult to make full use of their levy funds before they expired, resulting in unused contributions being redirected to a broader government pot.

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How does the levy work now??

Currently, businesses eligible for the levy must create an Apprenticeship Service account to manage their funds. These funds are:

• Only accessible for 24 months
• Limited to use on training provided by approved apprenticeship providers
• Lost if not used within the timeframe?

For smaller businesses, while the co-investment model reduces financial burdens, the hurdles this brings can make it challenging to navigate.

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What’s Changing in 2025? Introducing the Growth and Skills Levy

In September 2024, the Prime Minister announced plans to transform the Apprenticeship Levy into the Growth and Skills Levy. While some changes are expected to begin in 2025, the full implementation timeline is still being determined.

Key Changes:

Broader Training Options

• Businesses will be able to use levy funds for a wider range of training programmes, including shorter courses and upskilling initiatives, not just traditional apprenticeships.
• This flexibility aims to address the specific needs of businesses and industries.

Simplified Processes for Smaller Businesses

• The co-investment model will remain, but the government plans to reduce red tape, making it easier for SMEs to access and use funding.

Regional Skills Alignment

• The new scheme will encourage businesses to invest in training aligned with local skills gaps, helping build stronger regional economies and a more resilient workforce.

Focus on Growth Sectors

• Specific incentives will support training in high-demand and growth industries, helping businesses prepare for future market needs.

Why Are These Changes Significant?

?The revamped levy offers businesses an opportunity to approach training and development with greater flexibility and strategic focus.

?Key Benefits:

• Tailored Training: With more options available, businesses can choose programmes that directly address workforce needs.
• Streamlined Processes: SMEs will benefit from reduced administrative burdens, freeing up time and resources.
• Community Impact: By aligning training with regional skills gaps, businesses can contribute to the development of local economies while securing a skilled workforce.

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What Does This Mean for Businesses?

If you’re a small or medium-sized business, these changes could redefine how you approach workforce training.

Benefits include:

• Greater flexibility – Tailored training options to address immediate needs or invest in long-term skill development.
• Simpler access – Less bureaucracy means more time to focus on business growth.
• Alignment with industry trends – Companies in tech, renewable energy, healthcare, and other growth sectors can now invest in specialised training.

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Benefits to Employees

Employees also stand to gain significantly from the new levy. With broader training options, employees can:

• Access diverse learning opportunities beyond apprenticeships.
• Enhance career progression with skills directly relevant to their roles.
• Adapt to future industry trends, such as AI, green technology, and digital transformation.

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What does this mean for Apprentices on a programme??

These changes to the apprenticeship sector will have a noticeable impact on the delivery of training for apprentice learners. Breaking barriers for aspiring apprentices & offering shorter Shorter, More Flexible courses…Making the sector more accessible than ever!

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Key Dates to Keep in Mind

• End of 2024 to Early 2025: Government consultations with businesses and industry experts to refine the Growth and Skills Levy framework.
• April 2025: The updated scheme is set to roll out, bringing new guidelines and opportunities.

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How to Prepare for the New Levy

To maximise the benefits of these changes, start preparing now. Here are six steps:

1. Assess Your Training Needs – Identify areas where training can add value to your business.
2. Engage in the Consultation Process – Participate in discussions to shape how the scheme works.
3. Stay Informed – Follow government announcements for updates.
4. Engage with Training Providers – Research local and national providers to find the best fit for your needs.
5. Plan Your Budget – Allocate funds effectively to ensure your workforce benefits from the new opportunities.
6. Communicate with Your Team – Inform employees about new training opportunities and how they can benefit from the changes.

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Final Thoughts

The introduction of the Growth and Skills Levy represents a significant shift in how businesses invest in their workforce. With greater flexibility, extended timelines, and streamlined processes, the scheme offers businesses the chance to build a skilled and adaptable workforce.

Whether you’re an SME looking to upskill employees or a larger organisation preparing for future challenges, these reforms provide an opportunity to rethink your training strategy and stay ahead in a competitive market.

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