Education · United Kingdom · Funded-childcare rate versus cost

England nurseries lose money on every funded child. Top-up fees are banned.

On 1 September 2025 England widened the 30-hour funded entitlement (the state-paid childcare scheme for working parents) to cover babies from nine months old. The Department for Education pays nurseries a centrally fixed hourly rate: about £6.12 for three- and four-year-olds, with a £5.27 floor under the 2025-26 operational guide. Providers say the rate sits £1 to £5 below their cost per funded hour, once staff ratios, the April 2025 employer-NIC rise, food, rent and business rates are counted in. The trade body NDNA puts 85% of providers losing money on each new funded place; Nursery World finds the average setting subsidises 15-hour places by about £32,000 a year. Top-up fees are illegal. 39% of providers are now considering offering fewer funded places, with business rates due to rise again from April 2026.

TL;DR

What hurts England's Department for Education pays nurseries a single centrally-set hourly rate (about £6.12 for three- and four-year-olds, £5.27 floor for younger ages) to deliver the 30-hour funded childcare entitlement. Operators say the rate is £1 to £5 below their cost per hour. They must offer the funded hours free and are not allowed to charge top-up fees to close the gap.
How big 85% of providers lose money on each new funded place; the average setting subsidises 15-hour places by about £32,000 a year; one London borough surveyed by NDNA had 86% of nurseries losing money on each funded place with monthly deficits of £7,000–£16,000; 39% are now considering offering fewer funded places; business rates rise again from April 2026 (about £4,000 per setting).
Why startups win Sell English nurseries software that maximises lawful chargeable extras — paid meals, consumables, optional trips — and tunes the paid-to-funded session mix per child and per session, so the cost-recovery gap closes without breaking the top-up ban. Recurring per-setting SaaS billing with ~28,000 group-based providers as buyers. 5 self-marketing UK vendors cataloged below.

01The pain

On 1 September 2025 England widened the 30-hour funded entitlement (the state-paid childcare scheme for working parents) to cover babies as young as nine months. The Department for Education pays nurseries a single fixed hourly rate: about £6.12 for three- and four-year-olds, with a £5.27 floor for younger ages under the 2025-26 operational guide.⁶ The National Day Nurseries Association (NDNA, the providers' trade body) found 85% of providers lose money on each new funded place; Nursery World puts the average setting at about £32,000 a year subsidising 15-hour places.^1,2

Operators say the funded rate sits £1 to £5 below their actual cost per funded hour, once staff ratios, the April 2025 employer-NIC rise (a payroll tax now levied above £5,000), food, rent and business rates (the UK commercial property tax) are counted in.³ Settings must offer the funded hours free at the point of use and cannot legally charge a top-up fee to close the gap.⁴

85% of providers lose money on each new funded place;¹ average setting subsidises 15-hour places by ~£32,000 a year;² 39% now considering fewer funded places.³

In one London borough surveyed by NDNA, 86% of nurseries lose money on each funded place, with monthly deficits between £7,000 and £16,000.¹ MoneySavingExpert's 2026 update records settings raising or cancelling the chargeable extras (meals, consumables, trips) that had balanced the books.⁵ Business rates rise again from April 2026, adding about £4,000 a setting. The Treasury asks settings to deliver the service at a loss and forbids them from charging the missing amount.

"We are a not-for-profit charity in a sole-use rented property currently offering 32.5 hours of care and education, 38 weeks a year, for the grand sum of £32.50 a week … the government are still not paying us enough to cover our increasing costs."

— United Kingdom · Foundation Stage Forum (eyfs.info), July 2025

Operators discussing this

These are real English nursery operators talking about the funded-rate-versus-cost pain in their own words, on the Foundation Stage Forum (eyfs.info) across a multi-year arc — a 2025 thread with six distinct operator-side posters and an older 2017 anchor thread on the same subforum. They are the reason this page exists.

«We are a not for profit charity in a sole use rented property currently offering 32.5 hours care and education, 38 weeks a year for the grand sum of £32.50 a week … The government are still not paying us enough to cover our increasing costs … it still brings in less for 5 x 2 year olds than 8 x 3 year olds.»

(English original — no translation needed.)

new funding arrangements · Foundation Stage Forum (eyfs.info), Education Funding subforum — 6 distinct operator-side posters (finleysmaid, sunnyday, Erin, Cait, Mouseketeer, louby loo) on a thread opened 2025-07-10 with last post 2025-07-30, fresh within 365 days; sits in a multi-year arc on the same Foundation Stage Forum's Education Funding and Setting Management subforums (topic 48683 "Stretching the 30 hours funding in a day nursery" 2017 with 5 posters, topic 46392 "30 hours funding and 2 year old's problem" 2017, topic 51783 "Funding audit" 2019).
«Ioana asks how to structure a 30-hour funded offer across the year; finleysmaid, FSFRebecca, lynned55 and AliceinWonderland walk through stretch-funding mechanics and the deduction maths providers must work with.»

(English original — no translation needed.)

Stretching the 30 hours funding in a day nursery · Foundation Stage Forum (eyfs.info), Education Funding subforum — older arc anchor with 5 distinct posters (thread_age_days 3232), showing the funded-rate-versus-cost question is an eight-year recurring operator pain on the Foundation Stage Forum, not a 2025 novelty.

02Who solves this today

UK nursery-management vendors whose own homepages name English early-years settings and name occupancy, funding management, billing, payments or session-mix as the thing they sell. Each homepage was checked live on the date of writing. Inclusion is not endorsement — it's a snapshot of who has put themselves in front of providers looking for help with the post-September-2025 funded-rate stack.

Famly — early childhood platform for UK nurseries

UK-headquartered nursery-management platform. Self-marketed verbatim as "An Early Childhood Platform" with the strapline "Less paperwork, more play". The product menu names "Occupancy & attendance" ("Predict, manage, track, and boost enquiries and attendance in seconds"), "Easy finances" ("Make accounting simple with in-app payments, funding & reconciliation") and "Efficient staffing" ("Plan rotas and holidays, get automatic ratios & manage your team easily"). Where an English setting goes when the post-September-2025 question is "how do I see occupancy and the funding-vs-fee mix in one screen, before the next month's payroll hits?".

famly.co

Ovivio (formerly Blossom Educational) — UK nursery management software

UK nursery-management vendor, brand consolidated under Ovivio. Self-marketed verbatim with a dedicated "Funding" feature page nested under "Manage → Invoicing → Funding", a "Nursery Funding Calculator" in the resources hub, plus solution pages for "Day Nursery Software", "Montessori Software", "Preschool Software" and "Nursery Group Software". Product line includes "Ovivio Pay" for in-app payments. The Funding module and per-setting funding calculator are the surface most directly aimed at the funded-rate-versus-cost question.

ovivio.com/uk

Connect Childcare — Connect Cashflow + iConnect + ParentZone

UK nursery management suite (operating since 2004) with three integrated products: Connect Childcare (management), iConnect (in-room observations) and ParentZone (parent app). The Connect Cashflow payments product is the most direct fit here, self-marketed verbatim as "All-in-one nursery payments accepting cards, Direct Debit, Open Banking and Tax-Free Childcare in one simple parent experience" with "Built-in Tax-Free Childcare (HMRC-linked) payments" and "live payment transactions, your full account balance and payment history in one place". Where a UK group goes to collapse the funding-claim / Tax-Free-Childcare / direct-debit billing surface into one rail.

connectchildcare.com

Parenta — Nursery Management Software with Funding Summary Report

UK nursery-software vendor self-marketed as "The Most Cost-Effective Software On The Market". The product page names a specific report aimed exactly at the painpoint on this page: "'Funding Summary Report'… It clearly shows the gap between what government-funding covers and your actual costs". The funding module also automates per-child rate changes: "Set up the funding once, and the system will automatically apply the correct amounts as children change rooms or reach key milestones, like turning 3 years old". A separate "9-Month Funding – NOW AVAILABLE" module covers the September-2025 expansion. Where a setting goes when it wants the funded-rate-versus-cost gap surfaced as a report, not an instinct.

parenta.com

Nursery in a Box — UK nursery management system

UK-built nursery management system self-marketed verbatim as "The All-In-One Nursery Management System" with the strapline "We handle the admin, so you don't have to". Homepage states "500+ nurseries Actively using Nursery in a Box across England, Scotland and Wales", "20+ years in early years" and "UK-hosted, encrypted and fully GDPR compliant". Positioned at "From small independents to large nursery groups". Where a smaller English setting goes when it wants one tool for staffing, registers, billing and parents without the multi-product Connect / Famly stack.

nurseryinabox.com

Listed providers publicly self-market to English / UK nursery operators in one of the wedges named above. Inclusion is not endorsement. Considered and dropped (each fetched on the date of writing): Tapestry (tapestry.info) — fetch returned HTTP 429 (rate-limited) at the time of writing, so no homepage copy could be inspected first-hand; listed by name as a known UK EYFS observation product. iConnect is included above as part of Connect Childcare's suite rather than listed separately. Kinderly (kinderly.co.uk) — positioned around EYFS observations and CPD training rather than directly on the funded-rate-versus-cost surface, dropped in favour of vendors whose homepage names funding management explicitly. The named press outlets (Nursery World, NMT Magazine), trade body (NDNA), Commons Library and gov.uk are sources, not solution providers; the Department for Education is the entity setting the funded rate, not a solution.

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