Apprenticeship funding rules update 2025

Apprenticeships provide an alternative access route to careers and fields which ordinarily required higher education qualifications such as bachelor’s or master’s degrees. 

This route provides an alternative way of acquiring qualification whilst working simultaneously in a role relevant to that qualification. 

The potential merit of pursuing apprenticeships to meet skills requirements is predicated by the existence of the employers’ levy – effectively a surcharge added to the PAYE bill when payroll is in excess of £3m per annum. The levy converts into credits that can be drawn down to meet training costs when a registered training provider is used to support the training requirements.

Employers with a lower employee payroll are not excluded from the apprenticeship programme – different funding rules for apprenticeships apply to small employers with direct government funding provided.

The Department for Education (DfE) publishes Funding Rules which set out a significant number of expectations that employers and their training providers must ensure that they are familiar with and comply with. The rules tend to be updated annually – usually with a consultation process beforehand.

For apprenticeship starts in 2025/26 there has been no consultation, but reasonably early notification of amendments made to the funding rules providing opportunity for training providers to update their terms and conditions upon which they offer apprenticeship training support to employers.

Effective from 1 August 2025 the following key changes will need to be implemented for new apprenticeships. 

Duration of the apprenticeship

Perhaps the most significant change is to provide for a lowering of the minimum period that an apprenticeship must last to 8 months. This change is subject to the passage of a legislative amendment but there will be circumstances in which the nature of the apprenticeship and the ability of apprentices to pass successfully through end point assessments over that shorter period is considered practical.

Following an apprenticeship programme must be justified

For funding to be accessed, the Training Provider must be able to demonstrate that the prospective apprentice requires significant new knowledge, skills and behaviours to be competent in a given role. This provision was removed from the previous rules but has been reinstated due to its significance. It is a responsibility of the training provider and will be a key focus of the initial assessment of a prospective apprentice by the training provider.

Off the Job (OTJ) training requirements

DfE have amended OTJ training requirements by introducing minimum requirements for each apprenticeship standard. An Apprenticeship Standard is the standard required to fulfil that specific job role. The changes mean that the 20% OTJ rule is being phased out, and each standard will have a specified requirement for time spent in OTJ training. It is more flexible in nature if, during initial assessment it can be seen that the learner has prior relevant learning and therefore learning time can be reduced. Apprenticeships, therefore, must conform to the specified minimum OTJ requirements for the standard concerned.

Adjustments for part-time apprentices are also being removed. This provides greater flexibility to establish the required quota of OTJ against actual working hours to ensure training expectations are realistic. 

Have your training provider’s terms and conditions been updated?

Employers have responsibilities to ensure that apprenticeship training is provided compliantly with the requirements of law and the DfE funding rules. The training providers terms and conditions should be updated annually. You can test if this has happened by checking for references within the terms for ESFA or the Education and Skills Funding Agency. That agency was abolished with effect from April 2025 its functions being absorbed into the DfE from April.

What is happening to funding of Level 7 Apprenticeships?

Controversially, the government recently announced an intention to amend employers access to levy funds by removing eligibility for level 7(master’s level) apprenticeships.

The government intends to shift funding away from Level 7 apprenticeships to prioritise younger workers and those at the start of their careers. This means businesses will need to fund more of these apprenticeships themselves.

However, government funding for Level 7 apprenticeships will continue for those under 25 who are either care leavers or have an Education, Health and Care Plan (EHCP) at the start of their apprenticeship.

Apprenticeship assessment changes are also on the way

As we went to print Ofqual launched its consultation on a new apprenticeship evaluation system. Considered by many to be the most significant change to apprenticeship assessment in a decade, if implemented we will see an end to the principle of end point assessment. The proposed new approach will build into the apprentices journey formal structured assessment

A change that we believe employers will welcome is the introduction of a streamlined structure for apprenticeship assessment plans. The new plans will be presented at a higher level of detail with limited prescription of  the requirements apprentices should demonstrate within the assessment process. More information can be found at this link.