Early years education is critical for every child’s development and funding plays a vital role in making quality nursery care accessible and sustainable. Recognising its importance, the UK government has introduced various funding initiatives to support families and nurseries.
This article explores how early years and nursery funding works, the latest changes coming in 2025, and how digital tools like Nursery in a box can help providers manage funding more effectively.
Government Funded Childcare Entitlements
In England, parents may be eligible for a range of funded childcare schemes:
- 15 Hours Free Childcare: All 3- and 4-year-olds can access 15 hours of free early education or childcare per week. Eligible 2-year-olds from lower-income families may also qualify.
- 30 Hours Free Childcare: Working parents of 3- and 4-year-olds can access up to 30 hours of free childcare per week, helping them balance work and family life.
- Expansion for Under-3s: From September 2024, working parents of children aged 9 months and up will be entitled to 15 hours per week. By September 2025, this will increase to 30 hours per week, offering funding from infancy through to school age.
How Nursery Funding is Allocated
The Department for Education distributes early years funding to local authorities using the Early Years National Funding Formula (EYNFF). Local authorities then pass this funding on to providers like nurseries, preschools, and childminders.
Average hourly funding rates for 2024/25 are:
- £8.28 for 2-year-olds
- £5.88 for 3- and 4-year-olds
However, actual rates may vary by local authority.
The Real-World Challenges of Nursery Funding
Despite these government initiatives, many early years providers face financial pressure:
- Rising Staff Costs: Increases in the national minimum wage and other overheads have driven up operating costs, making it harder for settings to remain profitable.
- Funding Shortfalls: In many cases, the government rates do not cover the full cost of care. Providers may limit funded places or request voluntary contributions from parents.
- Policy Constraints: New rules mean nurseries cannot add mandatory charges for funded hours, limiting flexibility.
These challenges affect the financial health of settings and, in some cases, force them to reduce availability or even close.
Impact on Early Years Education
The pressure on nursery funding has far-reaching effects:
- Reduced Access: Fewer funded places may make it harder for some families to access childcare.
- Quality Concerns: Staffing issues and cost-cutting measures can impact the quality of education.
- Sustainability Risks: Persistent funding gaps threaten the long-term viability of early years settings.
How Nursery in a box Simplifies Early Years Funding
At Nursery in a Box, we understand how complex and time-consuming managing nursery funding can be. Our all-in-one nursery management software is built to help providers stay compliant, financially secure, and focused on what matters most: the children.
Streamlined Funding Management
- Automatic Entitlement Calculations: Apply 15 or 30 hours per child with precision.
- Support for Split Funding: Easily manage children funded by multiple LAs or settings.
- Local Authority Rate Management: Tailor rates to match what your local authority pays.
Clear Invoicing & Financial Visibility
- Detailed Invoices: Show funded vs. chargeable hours for full transparency with parents.
- Forecasting Tools: Predict income from funding and paid hours for confident planning.
- Debt Management: Track overdue payments and send automatic reminders.
Reduce Admin, Stay Compliant
- No More Spreadsheets: Automate complex billing and funding reports.
- Audit-Ready Reports: Export documentation that meets LA and Ofsted requirements.
- Digital Parent Declarations: Collect and store funding agreements online.
The Bottom Line: Smarter Nursery Funding
Nursery in a box doesn’t just help you manage funding, it empowers you to make smarter decisions, improve sustainability, and reduce admin so you can focus on delivering high-quality early years education.
Ready to simplify your nursery funding?
👇 Book a free demo today and see how Nursery in a box can support your setting.
Hannah
Marketing Manager
