Understanding childcare funding in 2024

Looking for a simple breakdown of the who, why, what, where and how of childcare funding 2024? You’ve come to the right place.

Want to dive into whether funding works for you in 2024? Try our new nursery funding calculator, built in partnership with MBK to give you an insight into whether funding will fit into your setting.

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Understanding childcare funding in the UK

Making childcare more accessible for parents is one of the 2024 changes planned for the early years sector.

You will be getting to grips with the new working parents funding fundamentals. Working hard to make sure the increased funding rates and eligibility work for your nursery.

Working parent funding is not the only avenue for childcare places, let’s explore different ways your nursery might get funding this year.

What are the types of childcare funding in England?

There are several ways parents can access free childcare spaces in 2024. The eligibility for funding (like tax-free childcare) has changed with the introduction of the 2024 working parent funding. Let’s understand funding!

You can get your funding from:

Universal credit
Childcare vouchers
Tax-free childcare
Additional funding (like Early Years Pupil Premium)

What is tax-free childcare funding?

Tax-free childcare is used to help parents with the cost of childcare for children up to the age of 11 years old. It is used to pay for approved childcare providers such as childminders, nurseries, after-school clubs and play schemes. For a parent to choose your nursery and use their tax-free childcare, your setting must be signed up for the scheme.

Parents can get up to £500 every 3 months (up to £2000 per year) for each child to go towards childcare costs. The payments double if the child has a disability (£4000 per year, per child). Parents will set up an online childcare account once they have checked if they are tax-free childcare eligible. For every £8 they pay into the childcare account, the government will pay £2.

How are childcare vouchers used?

The DfE childcare voucher scheme was closed to new applicants in 2018. If parents signed up before this date they can still use them. Childcare vouchers allow parents to pay for childcare from their pre-tax salary.

The vouchers can be used to pay for childcare up to the 1st of September after the child turns 15.

Childcare vouchers can be used if a provider is Ofsted registered and if the provider accepts childcare vouchers. There isn’t a limit on the number of children this scheme can be used for.

A basic rate taxpayer may be able to buy up to £55 of vouchers per week, they can be kept for a long time too and spent in holidays (subject to the childcare provider accepting this).

Universal credit and childcare funding

Universal credit is a government benefit scheme that supports parents on low incomes or who may be out of work. Universal credit funding for childcare can support several children up to the age of 16. Parents will be entitled to an extra child amount for any child born before 6th April 2017. However, unless there are special circumstances, a third or following child born after 6th April 2017 will not meet additional payment requirements.

Tip:

You may find it useful to share a benefits calculator with your nursery setting’s parents to support them with the funding they may be able to receive.

With universal credit, your setting’s parents may be able to get financial support for up to 85% of childcare costs. This breaks down into a maximum per month:

Previously, universal credit childcare funding was paid in arrears. But with the new changes, parents can receive childcare payments upfront. Once the payment is in the tax-free childcare account, the parents can pay the nursery provider.

It used to be that universal credit childcare funding was paid to nurseries in arrears. Changes in 2023 meant that parents received their payments upfront, in their tax-free childcare account.

It can take up to 24 hours for payments to show in the childcare account when paid from the parent’s own account. A further 48 working hours can be taken to move the money from the childcare account to the early years provider’s account. Don’t forget, bank holidays can impact this payment schedule too!

Parents on universal credit may be able to claim back up to 85% of their current wraparound childcare costs. Although this may change from September 2024.

Up to £289 million will be provided to schools to test different ways to enhance their wraparound provision. This increase in wraparound funding will be rolled out in September 2024 with the aims that all parents will be able to access wraparound care from their school or another provider by September 2026.

What is free childcare funding?

Free childcare funding is available to eligible families to help with the cost of quality childcare. The amount of funded childcare hours a child gets depends on the age, family income and other additional requirements.

Who is eligible for free childcare funding in 2024?

All 3 and 4-year-olds under universal entitlement get 15 hours of free childcare
3 and 4-year-olds with working parents who meet the eligibility criteria get 30 hours of free childcare
2-year-olds with working parents who meet the eligibility criteria get 15 hours of free childcare
Families who receive universal credit receive £951 for one child and £1630 for two

Free nursery places for two-year-olds

There are 15 hours of free childcare available for parents who meet the eligibility criteria. The following are examples of criteria parents must meet to be able to utilise the 15 hours of free childcare for their two-year-old:

Benefits of some form are claimed:
- Income support, jobseeker’s allowance, employment and support allowance, universal credit, and several other claimable benefits
- Working parents who meet the criteria
The child has an Educational Health Care Plan (EHCP)
The child is in receipt of Disability Living Allowance
The child is looked after by a local authority, or was looked after as a result of an adoption order

15 hours of free childcare for three-and-four-year-olds

Known as the universal entitlement, all children between the ages of 3 and 4 (until they begin reception class in primary school) are able to receive 570 hours of free childcare over one year. This is spread out between 38-52 weeks per year (commonly taken as 15 hours per week).

30 hours of free childcare for three-and-four-year-olds

In 2023, the DfE extended entitlement for childcare funding for three- and four-year-olds to working parents.

Amongst other criteria, parents who work more than 16 hours per week and earn less than £100,000 are entitled to 30 hours of free childcare per week for children aged three or four. 

Additional childcare funding available in 2024

There are additional funding entitlements nurseries should be aware of. They can be specific to your location or staff force needs.

Other funding options to explore:

Early Years Pupil Premium
SENIF
DAF
Funding for parents at college
Employee benefits

What is the Early Years Pupil Premium?

The Early Years Pupil Premium (EYPP) is extra funding that is given to early years providers from the local authority to further support disadvantaged children between the ages of 9 months and 4 years old.

For the 2024-2025 financial year, childcare settings will receive 68p per hour per eligible pupil for up to 570 hours. This works out to an additional £387 per pupil per year.

Early years providers are responsible for letting the local authority know which children in your setting are eligible for EYPP. This relies on excellent communication and relationships with your parents.

Tip:

Blossom’s Parent App helps smooth out all questions about funding, and more, between nurseries and parents with its easy two-way communication feature.

What is the SEN Inclusion Fund (SENIF) in EYFS?

Your local authority is required to have SENIFs for all three- and four-year-olds who are using the free entitlements. These funds are used to help address the needs of SEND children.

The fund is aimed at those with lower level or emerging SEND. The SENIF is to be used as top-up grants on a case-by-case basis.

What is the Disability Access Fund (DAF) for EYFS?

As a childcare provider, you will receive at least £910 per qualifying child annually to help make reasonable adjustments to your setting for their benefit. If the child is placed at two nurseries, only one can receive the DAF – it should be the one that most needs new

How do parents at university pay for childcare spaces?

If the parent is at college, then the Department of Work and Pensions may pay for their child’s fees at a nursery. But again, there are certain criteria that must be met. This includes that they must attend their classes 95% of the time.

The entire fee may not be covered by this type of funding, commonly only 80-90% of the fees are paid and the remaining unpaid amount must come directly from the parent’s pocket. Remember, this funding gets paid directly to the parents, rather than your setting.

How to get parents’ employers involved

Should these funding routes prove insufficient for your parents, why not encourage them to talk with their employer about funding options. If they have secured vouchers before 2018, then that can continue with no issue. But another option may be to have parents’ employers make direct payments to your setting.

It’s not uncommon that certain companies have arranged deals with nurseries before. As by securing a deal with a company your childcare business can increase occupancy while your parents employed by them are given more childcare financial relief. You can even take it a step further and negotiate to open a branch of your nursery at the company’s premises itself.

Changes to childcare funding 2024-2025

By 2028, the government expects to spend an excess of £8bn a year on free childcare hours and early education. Here is a summary of childcare funding changes for 2024:

Working parents of two-year-olds now have access to 15 hours of free childcare (this was introduced in April 2024)
From September 2024, the 15 hours of free childcare will be extended to eligible working parents with a child from nine months old
From September 2025, the offer will extend to 30 hours for eligible working parents with a child from nine months old to school joining age

How can nurseries manage childcare funding changes?

Depending on your nursery’s business model, you may have different plans for making childcare funding work for you and your budget goals.

Try our new nursery funding calculator, built in partnership with MBK to give you an insight into whether funding will fit into your setting.

The way your setting manages funded places will change, if you decide to offer government-funded places of course. Nurseries across the country have prepared to manage the funding changes through:

Getting expert advice from EYFS consultants or other nursery managers
Altering their nursery business model (like introducing consumable charges or creating nursery packages for parents)
Planning for additional changes so the funding remains sustainable
Focused on their marketing strategies to ensure bums on funded seats across the nursery rooms

The ratio of nursery practitioners to children is currently 1:4. This now includes an optional 1:5 ratio, making space for additional children in each room. There are dangers of increasing workload to an already busy role for nursery practitioners.

How to help parents navigate childcare funding applications 2023

Navigating nursery funding applications can be challenging for even the most seasoned parent. Your parents may or may not be aware of all the benefits that they are actually entitled to. Therefore, it’s worth hosting a social session to chat about all options that are available to them.

Having this session over a cup of tea with other parents is a good way to start the conversation and in a social, less intimidating way. It’s also a great opportunity for parents to connect with each other on their personal experiences.

For parents who may be eligible for several of the childcare funding streams, direct them to the childcare calculator tool from the DfE to help them work out which type of support will be most beneficial to them.

You may have some families who might require technical assistance or help with the literacy demands of the applications. If your setting is in an area of high English Additional Language (EAL) population, setting up workshops with translators available may be a beneficial route to explore.

Help parents to find out if they are eligible for free childcare

Parents may need support to determine what types of childcare they can use their funding for, especially those with multiple children across EYFS and primary school. Host a funding workshop for prospective and established parents to check eligibility for funding as well as additional supplement funding such as EYPP.

When should parents apply for 30 hours of free childcare?

Parents can apply for the 30 free hours of childcare (for three-and-four-year-olds) from when their child is 2 years and 36 weeks old.

How can parents apply for government free childcare?

If your parents already receive tax credits or other benefits, getting 30 hours of free childcare may affect the amount they can claim. Encourage your parents to look at the childcare calculator tool provided by the DfE to help to work out what the best type of support will be for them.

Parents will apply to see if they can receive free childcare funding online. You may have some families who might require technical assistance or help with the literacy demands of the applications. If your setting is in an area of high deprivation or high English Additional Language (EAL) population, setting up workshops with translators available may be a beneficial route to explore.

The online process for 30 hours of free childcare and tax-free childcare are the same application. Parents will find out if they are able to receive both during one application.

If they are eligible for the 30 hours, they will be given a childcare account (this is where the payment to the provider will come from). They will also get a code that will give them access to the 30 hours funding. They will be asked to give the code to yourselves (as the childcare provider) along with their National Insurance number and child’s date of birth.

Top tips for nurseries to stay up to date with childcare funding changes

Staying informed about EYFS funding changes

There is a lot of information surrounding EYFS funding changes, not all are easily digestible! Stay informed about important funding changes by subscribing to a trusted provider’s monthly newsletter or Blossom’s blog series as we release top-industry articles several times a month.

Communicate with parents regularly

Your parents will regularly communicate with your nursery team via your Blossom Parent App. Keep them up to date with any changes and direct them to services that can assist further with applications and payment questions (like the childcare services helpline on 0300 123 4097).

Track nursery funding

One of the most common financial mistakes nursery owners make is not tracking those children eligible for funding correctly. Blossom allows nursery managers and owners to highlight pupils who are eligible for additional funding, tracking if payments need to be chased up as well!

Understanding childcare funding in 2024

Understanding childcare funding in the UK