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Making sense of available support for nursery costs


Let’s be honest – we all think that early years education should be free at the point of delivery. Just like the NHS.


But, sadly, it is not.


Despite the fact that the first five years have the biggest impact on a child’s life and their future growth, learning and development, the government still does not see this sector as part of the essential services.


It breaks our hearts.


And referring to it as simply ‘childcare’ is just not adequate. It makes it sound like babysitting.


Our staff are fully qualified early years teachers. They are highly trained professionals, not just babysitters. Some have spent years training and all of them maintain their qualifications on a regular basis. And, unlike school teachers that often focus on a specific subject, they work across all areas of child learning and development and need to have a deep level of understanding of child development, child psychology, and neuroscience. All of these fields change all the time, as our knowledge and understanding expands.


They are using every possible interaction with each child as a teaching moment.


They engage in complex, in the moment, planning to help each child grow across all seven areas of learning.


And they are not only teaching, they are providing high quality care for the most vulnerable of our

society – from babies to early years pupils getting ready for school.


The expectations (from Ofsted and from ourselves) are super high.


And they should be!


But the pay is very low. Let’s face it – many practitioners would make more money stacking shelves at a supermarket or delivering packages, with far less responsibility. And yet, they stay for the love of what they do.


Whereas we try to keep our fees as low as possible, delivering such education in a way that is safe, effective and inclusive, is very expensive. And that’s before you add the cost of setting up a nursery (or securing funding to buy one), business rates, ongoing training costs, and high rent for premises in some areas into the equation.



So, what support is available?


Government support for early years education costs is complex. But it roughly falls into three categories:

  • Tax free childcare - you pay into your childcare HMRC account and the government ads 20%. This is limited to £500 every three months or £2,000 per year.

  • 15 hours for 2 year olds - please see notes below re 'hours'

  • 15/30 hours for 3-4 year olds (universal 15 hours and additional 15 hours) - again, please see notes below re 'hours'

Please keep in mind the following:

  • You can apply and check availability for tax free and 3/4-year-old 'hours' options here: https://www.gov.uk/apply-for-tax-free-childcare. It is the same form for both options.

  • If you suspect you might qualify for 2-year-old funding - you must apply through the local authority. Each authority has their own process.

  • Eligibility (other than 2-year-old funding) must be reconfirmed with HMRC every three months - failure to do so will mean a loss of that entitlement and the nursery will not be able to claim for it from the local authority. HMRC sends you an email to update your details. If you do not update within the grace period, when a nursery puts in its funding documents with the local authority, they bounce, and they will have to invoice you for those hours instead.

  • If you are self-employed or have set up a business recently, you could still qualify for the tax free and 'free' hours.

  • By 'free hours' the government means hours paid at the local authority hourly rate. This is not the rate of the actual cost of the provision! This forces some nurseries to require a ‘voluntary contribution’ on top of the funded rate, to be able to meet their actual costs of provision. Some nurseries do not accept such funding, as it does not meet their costs.

  • 15 hours for 3-year-olds is a universal entitlement but it only applies the term after your child turns 3. This is highly frustrating, particularly if your child's birthday is at the start of the term and you must wait until the following term to access this eligibility, even if you already have a 30-hour code from HMRC.


Upcoming funding changes


Many of you might be aware of the announcements in the last Chancellor’s budget regarding additional funding for early years education funding. So, what does that mean for you and your child?


Under these plants, from April 2024 – all 2-year-olds of working parents will be entitled to 15 ‘hours’ of free early years education. If you work and your child is 2 before the start of April, you should be able to qualify. That will make early years education more accessible for a much larger cohort of pupils.


We recommend booking your place at a nursery as soon as possible, ahead of April, as the system is currently not set up to handle all likely applications. There are simply not enough spaces available and qualified, experienced, early years teachers in the country.


From September 2024, this 15 ‘hour’ entitlement will apply to all babies and children from 9 months to 5 years. This applies, again, to working parents, although the details are not yet fully fleshed out.


From September 2025, all children of working parents, aged 9 months to 5 years, should be entitled to 30 ‘hours’ of early years education.


This is, of course, a huge help for parents, provided there is no change of government and a u-turn on this funding approach. However, unless the government significantly increases funding that they allocate for each of those ‘hours’, be prepared to have to add a ‘voluntary contribution’ on top of this funding, in order to meet the costs of nurseries in some areas, and demand for places.

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