Can somebody please explain to me what is the difference between each difficulty level:
Easy, normal and most importantly the hard level.

im not 100% sure but i think the harder the level the less money you start with, the worse the starting horses in your stable are, and maybe the competition from the other horses is harder.

Easy: £200,000 and more horses
Normal: £100,000 less horses
Hard: £50,000 and four horses I think.

The level of competition is higher, so it is harder to win races the harder the level you are on. There was some speculation on SO3 that the hard level actually gave you better horses for the league because the competition is so much better so if you have one which wins multiple G1's it is better than one that wins the same races on easy level. But I'm not sure if this was ever proved.