Reeves: Fully funding apprenticeships for under-25s at SMEs
No mention of a new tax on limited liability partnerships (LLPs) and making apprenticeship training free for under-25s in SMEs were the good news for lawyers in yesterday’s Budget.
The prospect of employer-style National Insurance contributions was floated in the media last month and triggered strong opposition from the likes of the Law Society, City of London Law Society and Association of Partnership Practitioners.
Law Society president Mark Evans said: “The legal sector is already contending with major regulatory changes in anti-money laundering and compliance. Any additional burdens would have created a perfect storm on firms’ ability to invest, hire, and contribute to growth, which could prove damaging to the wider economy.”
Andrew Allen, a partner and head of legal sector at accountants PKF Francis-Clark noted that the increase of 2% on the ordinary and upper rates of dividend income tax from April 2026 meant that companies were now even more expensive for extracting profits than LLPs – around a 9% differential for additional rate taxpayers.
He predicted there would also be upward inflation on salaries given the changes to pension salary sacrifice, while changes to property taxes may lead to rent inflation.
In May, the government decided to limit funding for Level 7 apprenticeships – such as those for solicitors – from January 2026 to those aged 16-21. Just this week in Parliament, it defended the move.
But Chancellor Rachel Reeves yesterday announced £725m for the growth and skills levy to help support apprenticeships for young people, including a change to fully fund SME apprenticeships for eligible people under 25.
Lucie Allen, managing director of legal education company BARBRI, described this as “a genuinely positive move for the profession”.
She explained: “It lowers one of the biggest barriers for smaller and regional firms that want to take on solicitor apprentices but have been nervous about the cost of training.
“However, it doesn’t resolve the core problem created by the forthcoming age restrictions on funding for Level 7 apprenticeships.
“We are still heading towards a system where a school-leaver joining a solicitor apprenticeship at 18 can be fully funded, but a paralegal or graduate in their mid-20s will often need an employer willing to self-fund. That risks hard-wiring a two-tier route into the profession.”
On the levy, she added: “Legal services need to be at the table. Law is a major UK export and one of the sectors being reshaped fastest by AI; it makes little sense to design levy-funded skills policy around engineers and data scientists alone.”
Short, targeted programmes in AI and digital practice for solicitors, paralegals and apprentices should sit alongside technical courses in other industries, Ms Allen argued, especially as many of the ethical and regulatory questions around AI would ultimately land on their desks.
“Law firms are already investing heavily in AI tools. The missing piece is funded, practice-focused training so people know how to use those tools safely and effectively in real cases. The growth & skills levy could play exactly that role, particularly if it is aligned with the solicitor apprenticeship standard and the SQE.”
The halving of the 100% capital gains tax (CGT) relief on disposing a business to an employee ownership trust could also have an effect in the legal market, where a steady trickle of firms have taken up the option.
Jay Sanghrajka, partner at accountants Price Bailey, commented: “The number of employee-owned businesses being created slumped to the lowest level in three years in Q2 2025 following the CGT clawback introduced in last year’s Budget.
“This further reduction in CGT relief could undermine the fragile recovery in employee ownership.”
“It fundamentally changes the risk calculus for sellers. While EOTs remain attractive for succession planning and employee engagement, the reduced tax incentive narrows the gap with other routes such as trade sales, private equity, or management buyouts.”
Liz Bayram, chief executive of AdviceUK, highlighted the welcome decision to lift the “punishing” two-child benefit cap but said any reforms to the benefits system “must be co-designed with people relying on the system and the advice services that support them”.
She said: “Without increased funding to alleviate pressures on chronically underfunded and overstretched advice services, many people will continue to struggle to access life-saving free, independent advice when they need it most; in turn, increasing pressure on public services.
“With the cost-of-living crisis and the impact of benefit cuts, advice services struggle to meet the skyrocketing demand for advice and support. Some are at a breaking point due to staff shortages. Without properly investing in advice, a bad situation is going to get worse.”
Last month, AdviceUK called for national strategies in England, Scotland and Wales to tackle a “severe and growing workforce crisis” facing advice services.
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