Funded hours must be free to parents. Meals, consumables and extras can be charged, but the statutory guidance says those charges must be voluntary and invoices itemised.
The early education and childcare statutory guidance valid from 1 April 2026 says funded hours are "available free of charge" and rules out top-up fees on them (paragraph A1.38). Providers may charge for consumables, meals and extras, but "these charges must be voluntary for the parent" (A1.32), parents can opt out (A1.34), and "Invoices and receipts should be itemised" (A1.42).
Your income for a funded hour is your council's provider rate. DfE's national average funding rates paid to councils for 2026/27 are £12.04 an hour for under-2s, £8.90 for 2-year-olds and £6.61 for 3 and 4-year-olds, and councils must pass at least 97% of the funding to providers. Each council sets its own provider rate.
Working parents in England have been able to claim 30 hours a week from 9 months old since September 2025, up to 1,140 hours a year. The difference between your cost per hour and the funded rate is met from additional hours, voluntary charges and the running cost of each room. A charge on the funded hours themselves is ruled out.
Childcare from an Ofsted-registered provider is an exempt supply of welfare services (HMRC VATEDU36900). HMRC lists drinks, picture books, crayons and toys provided to children in nurseries as goods supplied with exempt welfare (VATWELF3040). Goods that can be separated from the care are not covered by the exemption (VAT Notice 701/2, paragraph 3.4).
We work out your cost per hour by age group, compare it with your council's rates in the nursery funding gap calculator, and check your invoice templates against the guidance for day nurseries.
No. The statutory guidance says funded hours are free of charge and rules out top-up fees (paragraph A1.38).
No. Charges for meals, consumables and extras must be voluntary for the parent, and parents can opt out (paragraphs A1.32 and A1.34).
National averages, the 97% pass-through and the supplements.
The £2 top-up, the provider account and vouchers.
The welfare exemption, agency staff, registration and partial exemption.
We look at your last accounts, your payroll hours and your fee rates, and tell you what we would change.