As an expert in the Early Years sector, you know that consistent, high-quality staffing is the backbone of any nursery or pre-school. The recent funding changes announced in the November 2025 Budget represent a significant shift in how we will recruit and train the next generation of educators.
From April 2026, the transition from the Apprenticeship Levy to the new Growth & Skills Levy will introduce both new flexibilities and tighter financial rules. Here is a breakdown of what this means for your Early Years setting.
1. Major Wins for Small and Medium-Sized Employers (Non-Levy Payers)
If you are a smaller nursery or setting with a payroll under £3m, the news is overwhelmingly positive, particularly for recruiting young talent.
100% Funding for Under-25s
Currently, you may be paying a 5% co-investment for apprentices aged 16–24. From April 2026, the government will fully fund training and assessment for all apprentices under 25. This makes Level 2 (Practitioner) and Level 3 (Educator) starts much more accessible.
National Insurance (NIC) Holidays
You continue to pay £0 in Employer NICs for apprentices under 25 (earning up to £50,270). When combined with full funding, the “hidden costs” of taking on a young apprentice are virtually eliminated.
Existing Staff (25+)
For your more experienced staff or career-changers over 25, the 5% co-investment remains.
2. SMEs Accessing Apprenticeship Funds via the Levy Transfer
The apprenticeship levy is a tax on UK employers with an annual payroll over £3 million, intended to fund apprenticeship training. If levy-paying businesses do not spend all their contributions, they can transfer up to 50% of their unused funds to other employers via the government’s Apprenticeship Service account.
Access Fully Funded Training
Receive high-quality apprenticeship training without bearing the full cost.
Ideal for upskilling existing staff or recruiting new talent.
Reduce Recruitment Costs
Apprenticeships offer a cost-effective way to grow your team.
Levy transfer funds cover training and assessment, freeing up budget for other priorities.
Improve Staff Retention
Investing in professional development increases loyalty and reduces turnover.
Supports career progression pathways from Level 2 to Level 5.
Boost Quality and Compliance
Well-trained staff help meet Ofsted and EYFS standards.
Enhances your setting’s reputation for quality care and education.
Support Business Growth
Skilled practitioners enable you to expand capacity and services.
Builds leadership capability through Level 5 apprenticeships (e.g., Team Leader, Operations Manager, Early Years Coaching Professional).
Strengthen Community Links
Collaborating with larger levy-paying organisations fosters partnerships.
Demonstrates commitment to workforce development and social impact.
3. Key Challenges for Large Employers (Levy Payers)
For larger nursery groups, the “Growth & Skills” era brings a “use it or lose it” reality. The window to spend your funds is shrinking, and the cost of overspending is rising.
The 12-Month Expiry
Your levy funds will now expire after 12 months (down from 24). This requires much more precise workforce planning to ensure funds don’t vanish back to the Treasury.
No More 10% Top-Up
The government’s 10% monthly “bonus” on your levy account is ending. Your account will now reflect exactly what you pay in.
Increased Co-Investment
If you exhaust your levy pot and want to start more apprentices, you will now have to pay 25% of the cost (up from 5%).
4. Sector-Wide System Reforms
The government is moving toward a more “modular” approach to training.
Apprenticeship Units
From April 2026, you may be able to use levy funds for shorter, bite-sized “units” rather than full 12-month programmes. While the first wave focuses on digital and AI, this could eventually offer flexible CPD for Early Years staff in areas like SEND or Safeguarding.
Review of Standards
A review of existing standards (like the Level 3 Early Years Educator) is underway to “rationalise” and simplify them. We expect more focus on employer verification of “behaviours” rather than just external testing.
Maths and English Update
For adult apprentices (19+), there is a significant move to remove the requirement to achieve formal Level 2 Functional Skills to pass an apprenticeship, focusing instead on demonstrating these skills within their work tasks.
Summary of Changes (Effective April 2026)
What Should You Do Now?
Audit Your Pipeline
If you have staff aged 16–24 ready to start, consider whether waiting until April 2026 for 100% funding outweighs the need for them to be qualified sooner.
Review Levy Spend
If you are a levy payer, look at your “funds expiring” report. You have less time than before to commit that money to new starts. Consider transferring unused levy funds. You can pledge up to 50% of your annual levy funds to other employers through the Apprenticeship Service.
This supports SMEs, charities, and supply chain partners to access apprenticeship training. Additional benefits include:
- Positive CSR impact.
- Strengthens sector relationships.
- Helps develop skills in your industry and contribute to the local economy.
Budget for Wage Increases
Ensure your 2026/27 budgets account for the rise in the apprentice minimum wage.
- Apprentices under 19 will receive £8.00 per hour.
- Apprentices aged 19+ in their first year of apprenticeship also qualify for £8.00 per hour.
- Once an apprentice is 19 or older and has completed the first year, they must be paid at least:
- £10.85 per hour if aged 18–20
- £12.71 per hour if aged 21 or over (National Living Wage)
