£2,000 Apprenticeship Payment for Employers 2026
£2,000 apprenticeship payment for employers from October 2026 — who qualifies, how it is paid, how it is taxed, and the wider funding picture for small firms.
Small employers in England can now be paid to hire a young apprentice. The £2,000 apprenticeship payment covers apprenticeships with a practical period start date from 1 October 2026, and it sits on top of free training for under-25s and zero employer National Insurance on most apprentice wages. Put together, the numbers make a young hire much cheaper than most owners expect.
This guide covers who qualifies, when the money arrives, how it is taxed, and the wider apprenticeship funding for small business owners in 2026/27. One point first: apprenticeship funding is run separately in each UK nation. The hiring payment and training funding below apply to England. The National Insurance relief applies UK-wide.
What the £2,000 apprenticeship payment is
The official name is the apprenticeship hiring payment for non-levy employers. The Department for Education confirmed the detail in the apprenticeship funding rules for 2026 to 2027. In short:
- It is worth £2,000 per eligible apprentice.
- It is only for employers who do not pay the Apprenticeship Levy.
- It goes through your training provider. You do not fill in a separate claim form.
- It is not taken from your apprenticeship service account funds. The government pays it in full.
- You can spend it on anything. The gov.uk funding page suggests employment costs such as equipment, travel or uniform.
The money is there to tip the balance for small firms that have held back on hiring a school or college leaver. It is not training money. Training is funded separately (see below).
Who qualifies for the apprenticeship hiring payment
You qualify if you do not pay the levy and, at the start of training, the apprentice:
- Is aged 16 to 24. A 15-year-old also counts if their 16th birthday falls between the last Friday of June and 31 August.
- Has an apprenticeship agreement with a practical period start date on or after 1 October 2026.
- Is on the PAYE scheme you have added to your apprenticeship service account.
- Has not worked for you for more than 90 days before the practical period start date.
The rules include a small carve-out. Apprentices who joined you on 1 or 2 July 2026 still qualify if their training starts by 1 October 2026.
The payment also covers foundation apprenticeships, the shorter Level 2 route for younger starters. A non-levy employer that uses levy funds transferred from a larger business can still claim, as long as every other condition is met.
Who misses out
The 90-day rule is the one that catches people. The payment is meant for new hires. If a 20-year-old has worked for you for six months and you now enrol them on an apprenticeship, the training is still free, but the £2,000 is not available.
Levy-paying employers are excluded outright. So is any employer whose PAYE data does not match the provider's records. The government checks your HMRC PAYE data against the apprentice's National Insurance number. If the details do not line up, the payment is not made.
The Department for Education also reserves the right to change or withdraw the payment during the funding year. If it does, it has promised at least three months' notice and will keep paying for apprentices already eligible.
How and when the hiring payment is paid
The £2,000 arrives in two equal parts. Each is generated in the month after the apprentice hits the milestone. Your provider then has 30 working days to pass it on in full.
| Instalment | Amount | When it is generated | Condition |
|---|---|---|---|
| First | £1,000 | 90 days after the learning start date | Apprentice still employed by you and in learning |
| Second (standard) | £1,000 | 365 days after the learning start date | Apprentice still employed by you and in learning |
| Second (short or foundation) | £1,000 | 242 days after the learning start date | Applies where the typical duration is under 12 months, or on a foundation apprenticeship |
Three practical points:
- Early finishers. If the standard normally lasts 12 months or more but the apprentice finishes early, the second instalment is not paid.
- Breaks in learning. If the apprentice is on a break when a payment is due, it is delayed until they return and reach the required days in learning.
- Moving employer. If an apprentice moves to a new employer to continue the same apprenticeship after one instalment, the new employer can claim the balance if it meets the conditions.
Because the first instalment is generated after 90 days, the earliest payments are expected from January 2027. Budget for the apprentice's wages from your own cash in the meantime.
Apprenticeship funding for small business in 2026/27
The hiring payment is only one part of the picture. For new starts from 1 August 2026, the training rules changed too. The biggest win for small firms is that free training now covers apprentices up to age 24. In previous years the fully funded band for non-levy employers stopped at 21.
| Employer type | Apprentice aged 16 to 24 at start | Apprentice aged 25 or over at start |
|---|---|---|
| Non-levy employer | Government pays 100% | Government pays 95%, you pay 5% |
| Levy payer with insufficient funds | Government pays 100% | Government pays 75%, you pay 25% |
All of these figures apply up to the funding band maximum for the apprenticeship. If a provider charges more than the band, you pay the excess in full. Agree the price and the payment schedule with the provider before the apprenticeship starts.
Other payments that can stack
Depending on the apprentice, you may receive more than the £2,000. The gov.uk funding page lists:
- £1,000 additional payment for any employer hiring an apprentice aged 16 to 18 (or 15 under the birthday rule), or aged 19 to 24 with an education, health and care (EHC) plan or who has been in care. It is paid as two £500 instalments, at 90 days and one year.
- Up to £2,000 foundation apprenticeship incentive for apprentices aged 16 to 21 (or 22 to 24 with an EHC plan, care experience, or who are in or leaving prison) in set sectors. These include construction, digital, engineering and manufacturing, health and social care, hospitality, and retail and administration. It is paid in three instalments of £667, £667 and £666.
The funding rules treat these as separate payments, so an eligible 17-year-old on a foundation apprenticeship can attract more than one. Your provider will confirm which apply. The government has also announced Youth Jobs Grants through DWP for young people who have been on Universal Credit for six months or more. Check gov.uk for the live terms before you plan around it.
Apprenticeship levy 2026 — does it apply to you?
Most small businesses never pay the levy, which is exactly why they qualify for the hiring payment. Under the gov.uk levy guidance:
- The levy is 0.5% of your annual pay bill.
- It only bites if your pay bill is over £3 million.
- A £15,000 annual allowance reduces the bill, and it cannot be carried forward.
- Connected companies share one £15,000 allowance. Their combined pay bill counts towards the £3 million test.
- You report and pay it monthly through your Employer Payment Summary (EPS), as part of your PAYE bill.
If you run a group of companies, check the connected-company rule before you assume you are a non-levy employer. A group of small firms can tip over £3 million together.
Levy payers face tighter rules from 1 August 2026. The government factsheet on the Growth and Skills Levy confirms that new funds now expire after 12 months instead of 24, and the 10% government top-up on monthly contributions has ended. Funds already in accounts before August 2026 keep the 24-month expiry.
Apprentice employer National Insurance relief
This is the saving many owners overlook, and it runs every payday, not just once. If your apprentice is under 25, you pay 0% employer National Insurance on their earnings up to the Apprentice Upper Secondary Threshold. For 2026/27 that threshold is £50,270 a year, according to HMRC's rates and thresholds for employers 2026 to 2027. Above it, the normal 15% applies.
HMRC's employer further guide (CWG2) sets three conditions:
- The apprentice is under 25.
- They follow a UK government-recognised apprenticeship standard or framework.
- There is a written agreement naming that standard or framework, with a start and expected completion date. Keep this as your evidence.
In payroll software, set the apprentice to category letter H. When the apprenticeship ends or the apprentice turns 25, switch them to the right standard letter. The apprentice's own NI is unchanged, and so is their State Pension record.
A worked example
Take a 19-year-old apprentice in their first year on the apprentice minimum wage of £8.00 an hour (see the gov.uk minimum wage rates), working 37.5 hours a week.
- Annual pay: £8.00 × 37.5 × 52 = £15,600.
- Normal employer NI: (£15,600 − £5,000) × 15% = £1,590.
- Employer NI under category H: £0.
That is £1,590 a year saved before the hiring payment. If you claim the £10,500 Employment Allowance, the relief still matters. It leaves more of the allowance free to cover NI on your other staff. For the full payroll set-up, read our employer payroll and PAYE guide.
How the £2,000 apprenticeship payment is taxed
Treat the payment as taxable income. HMRC's Business Income Manual (BIM40451) says grants that meet revenue costs are normally trading receipts. A payment towards the cost of employing someone is a revenue item.
What that means in practice:
- Limited companies. The £2,000 goes into profit and is subject to corporation tax. At the 19% small profits rate, that is £380 of tax, leaving £1,620. Our UK corporation tax guide covers the rates and marginal relief.
- Sole traders and partnerships. It is part of your trading profit for Income Tax and Class 4 NI.
- Wages stay deductible. The apprentice's pay remains an allowable cost. The payment simply offsets part of a cost you are already claiming.
For bookkeeping, record each instalment as grant income, not as sales. Keep the provider's payment confirmation with your records. The money is not payment for anything you supply, so VAT should not normally arise, but confirm the treatment with your accountant if you are VAT-registered. Our small business bookkeeping guide covers record keeping in more detail.
How to claim — step by step
You do not apply for the payment directly, but you do need to get the set-up right. Miss a step and the validation check can fail.
- Confirm you are a non-levy employer. Check your pay bill, including any connected companies.
- Create an apprenticeship service account. Add the PAYE scheme the apprentice will be paid through. The government checks this scheme against HMRC data.
- Choose a training provider and standard. Agree the price and confirm the funding band.
- Recruit, then start training within 90 days. The apprenticeship agreement must show a practical period start date on or after 1 October 2026.
- Set up payroll correctly. Use category H for NI, and pay at least the apprentice minimum wage. After the first year, an apprentice aged 19 or over moves to their age-band rate, such as £10.85 for 18 to 20 or £12.71 for 21 and over.
- Reply to your provider. Send your bank details when asked. If an employer ignores three requests over three months, the provider must return the money to the government.
- Record the income. Log each £1,000 as grant income when it lands.
Common mistakes
- Enrolling an existing employee and expecting the £2,000. The 90-day rule excludes them.
- Adding the wrong PAYE scheme to the service account, so the National Insurance number check fails.
- Leaving the apprentice on category A, which means paying employer NI you did not owe.
- Forgetting that the payment is taxable and leaving it out of the year-end accounts.
If you would rather hand over the payroll and the records, our monthly plans cover both, and you can see the full list on our services page.
Frequently asked questions
Who can get the £2,000 apprenticeship payment?
Employers in England who do not pay the Apprenticeship Levy can get it when they take on an apprentice aged 16 to 24 at the start of training. The apprenticeship agreement must show a practical period start date on or after 1 October 2026, and the apprentice must not have worked for you for more than 90 days before that date.
When is the £2,000 hiring payment paid?
It comes in two £1,000 instalments through your training provider. The first is generated 90 days after the apprentice starts learning and the second at 365 days, or at 242 days for shorter apprenticeships and foundation apprenticeships. The provider must pass each payment on within 30 working days of receiving it. The earliest payments are expected from January 2027.
Do I need to apply for the apprenticeship hiring payment?
There is no separate application. The government validates eligibility using your provider's data and your HMRC PAYE data, then pays the provider, who passes it to you. You must add the correct PAYE scheme to your apprenticeship service account and reply when the provider asks for your bank details.
Is the £2,000 apprenticeship payment taxable?
In most cases, yes. HMRC treats grants that meet revenue costs as trading receipts, so the payment is taxable income for a company or a sole trader. The apprentice's wages are a deductible cost, so the payment usually just offsets part of a cost you have already claimed.
Do I pay employer National Insurance on an apprentice?
Not on earnings up to £50,270 a year if the apprentice is under 25 and on a government-recognised apprenticeship with a written agreement. Use category letter H in payroll. Employer NI at 15% applies only to earnings above that threshold.
How much does an apprentice cost a small business in training fees?
For non-levy employers in England, nothing for apprentices aged 16 to 24 at the start of training, up to the funding band maximum. For apprentices aged 25 or over, you pay 5% and the government pays 95%. You pay anything the provider charges above the funding band maximum.
This article is general guidance, not personal tax advice. Speak to a qualified accountant before acting on it.