Early Years Funding: Proposed Changes for Nursery Providers

The Government is consulting on changes to the way early years entitlement funding is distributed in England.

The Department for Education (DfE) says the reforms are intended to make the funding system simpler and more transparent, improve support for children with special educational needs and disabilities (SEND), and better target support towards disadvantaged children and families.

The Government consultation on early years funding closes on 14 September 2026, with a number of changes proposed from the 2027 to 2028 financial year onwards.

What Changes Are Being Considered?

The consultation includes a number of proposals that could affect nursery and early years providers.

Funding rates: The DfE is considering whether there should be a minimum funding floor for two-year-old and under-two funding rates. A minimum funding floor already applies to three and four-year-old rates.

SEND funding: The Government is proposing a simpler funding model with greater use of upfront inclusion funding. From 2028 to 2029, it proposes replacing SEN Inclusion Funds (SENIF) and the Disability Access Fund (DAF) with a streamlined targeted funding stream.

Unused contingency funding: From 2027 to 2028, the Government proposes allowing local authorities to redistribute unused early years contingency funding to providers during the financial year.

Ofsted fees: The DfE is considering reducing or removing annual Early Years Register fees, with some Ofsted costs instead funded through early years entitlement funding. Initial application fees would remain payable.

The proposals also include measures intended to direct more funding towards disadvantaged children and families.

What Could This Mean for Nursery Providers?

The reforms could affect how funding is distributed to nurseries and other early years settings, particularly those supporting children with SEND.

The proposed SEND reforms are intended to make funding simpler and quicker to access and reduce some of the variation in arrangements between different local authority areas.

Providers could also have a more formal role in local Best Start in Life arrangements. Subject to the consultation, the Government wants local authorities and early years providers to work in partnership on local Best Start in Life plans and with Best Start Family Hubs.

The reforms remain subject to consultation and are proposed to be introduced in stages. Nursery owners and early years providers should therefore monitor the outcome and consider how any changes may affect their funding arrangements and relationships with local authorities.

How We Can Help

Our experienced team advises nursery owners, operators and investors on the legal and commercial issues affecting early years businesses.

We can assist with nursery acquisitions and disposals, commercial agreements, employment matters, property arrangements and other legal issues affecting nursery businesses.

If you operate a nursery or early years business and require legal advice, call us on 020 4570 9600 or email hello@birdigroup.com.