The Autumn Budget 2025 sets out a series of reforms aimed at increasing opportunities for young people and encouraging employers to invest more consistently in skills. While some details of the longer-term apprenticeship reforms will be finalised over the coming months, several commitments are already clear and confirmed. These changes will affect both SMEs and levy-paying organisations and will influence how employers plan and deliver their future workforce development.
A new offer for young people and full funding for SMEs
The Government has introduced a Youth Guarantee, supported by £820 million, which aims to ensure that every young person can access a route into training, work or further education. A central part of this package is a commitment that apprenticeship training for under-25s in small and medium sized employers will be fully funded by the Government.
This confirmed change removes the previous 5 per cent employer co-investment for this age group and builds on an earlier policy that already waived the fee for apprentices under 22. The Treasury has allocated additional funding to deliver this extension, and official guidance for 2025 to 2026 confirms that co-investment for under-25 apprentices in SMEs will no longer apply.
This shift is significant, particularly as many smaller organisations are facing rising labour costs. By covering all training costs, the Government has reduced one of the main barriers to engaging with apprenticeships. SMEs will still need to fund wages, but the removal of training fees provides a clearer route to bringing younger talent into the workforce.
The Youth Guarantee also includes support for young people who have spent extended periods out of work. These individuals will be offered structured programmes to help them move towards employment or training, which may include funded work placements. While full details of placement funding and eligibility are still being set out, the intention is to create a pipeline of young people ready to progress into apprenticeships or employment.
Levy reforms and the shift towards the Growth and Skills Levy
The Government has confirmed that the apprenticeship levy will be reformed from April 2026, becoming the Growth and Skills Levy. The intention is to give employers greater flexibility in how they use levy funds while placing stronger expectations on timely investment in workforce development.
One element that has been announced is the introduction of shorter, modular training options, sometimes described as apprenticeship “units” or “modules”. These will draw on elements of existing apprenticeship standards and are designed to make it easier for employers to respond quickly to emerging skills needs. Although the full list of available modules has not yet been published, the policy direction is clear: levy funds will be useable for both full apprenticeships and shorter skills-based training.
It has also been signalled that the rules on how long levy funds remain in an employer’s digital account will be tightened. Government commentary and sector reporting indicate that this will involve a move towards a shorter window for using levy funds, although the exact timeframe is still being finalised. Employers should expect a more time-sensitive system than the current 24-month expiry period.
Other potential changes to employer contributions and top-ups are part of the wider levy reform proposals, but the Government has not yet published final rules for these. Until new regulations are laid, employers should continue to work to the existing funding framework while preparing for a more structured and flexible approach from 2026.
In practical terms, levy-paying organisations should begin reviewing how they use their levy funds now, considering both their current apprenticeship plans and how modular training could support targeted skills development in future.
Should employers take on apprentices now?
For SMEs, the case is clearer than ever. The removal of the 5 per cent contribution for under-25 apprentice training means that smaller employers can now access high-quality development for young staff without paying training fees. With confirmed funding in place for 2025 to 2026, this is an opportunity to grow talent in a cost-effective way.
For levy-paying employers, the transition towards the Growth and Skills Levy is a signal to use available funds more strategically. With new modular training routes on the horizon and a more structured funding system planned for 2026, organisations that act now will be better positioned to adapt to the forthcoming changes.
Across all employer types, the Youth Guarantee is expected to increase the number of young people seeking apprenticeships and training opportunities. This presents a wider pool of potential candidates, particularly those who may have faced barriers to entering work.
A clearer funding landscape and a moment for employers to act
The Autumn Budget 2025 confirms a strong emphasis on skills, productivity and opportunity. Although some elements of the long-term levy reform are still being finalised, the key commitments for 2025 to 2026 are already clear: fully funded apprenticeship training for under-25s in SMEs, new shorter training routes for all employers, and a reformed levy system designed to support more flexible skills development.
Employers who invest early will gain the most from these changes. By engaging with apprenticeships now, organisations can build stronger talent pipelines and prepare for a more responsive skills system that will continue to evolve from 2026 onwards.
