Straight Answers to the Questions Nursery Operators Keep Asking Us

What you can and can’t charge parents, and where Ofsted actually stands on your numbers.

If you run a nursery, the ground has shifted under your feet over the last eighteen months. The funded entitlement reached its full extent in September 2025, and working parents of children from nine months old can now access up to 30 funded hours a week. At the same time, the Department for Education tightened the rules on what you’re allowed to charge parents alongside those funded hours, and in November 2025 Ofsted changed the way it inspects you.

So it’s no surprise that the same questions keep landing on our desks.

Below are the ones we get asked most, with straight answers rather than a wall of caveats.

Before we get into them, here’s the single distinction that explains most of the confusion: almost every rule on deposits, fees and “extras” attaches to the funded hours, not to childcare in general. When a child is with you on privately paid hours, you have far more flexibility – you’re in ordinary consumer-contract territory, not public funding rules. Keep that funded-versus-private line in your head and most of what follows falls into place.

The rules themselves sit in the DfE’s Early education and childcare statutory guidance, which is technically written for local authorities. They reach you through the funding agreement you sign with your council. That’s why your council can act on them, and why your agreement is the document that binds you.

“Can we ask parents for a deposit or a registration fee to secure a place?”

For the funded hours, the short answer is, not as a non-refundable condition of getting the place.

The guidance is explicit that you cannot make a child’s funded place conditional on a non-refundable registration fee or a non-refundable deposit (this is paragraph A1.38, for the operators who like a reference). The principle behind it is simple — the funded hours must be genuinely free to access, so you can’t put a paywall, however small, in front of them.

What you can do is take a refundable deposit. The expectation is that you return it once the child takes up the place – most councils frame this as “returned in full within a month of the child starting”. There’s also a sensible carve-out if a family reserves a place and then never actually takes it up, you’re allowed to keep the deposit. So, you’re protected against no-shows, you’re just not allowed to pocket money as the price of admission.

For privately paid provision, the position is more relaxed. You can charge registration fees and take deposits, but the terms must be fair and transparent under the Consumer Rights Act 2015 – a deposit, for instance, should be a genuine reflection of your costs, not a penalty. The Competition and Markets Authority has published consumer-law guidance specifically for childcare providers, and it’s worth a read if you rely on these fees.

“Can we charge a retainer to hold a place over the summer?”

Retainers are common – you want to hold a child’s space over the holidays, so the family comes back in September, and you’ve got a room to keep staffed.

On funded hours, you can’t charge a non-refundable retainer fee in relation to an entitlement place. It’s on the same prohibited list as deposits and registration fees, for the same reason.

On privately paid hours, a holiday retainer is fine, provided the term is fair and clearly set out in your parent contract. In practice, the cleanest approach for most settings is to keep retainers firmly on the private side of the line and never let them bleed into the funded hours.

“What about a waiting list fee?”

This one’s a genuine grey area, and we’ll be honest about that. The guidance doesn’t mention waiting list fees by name, so you have to look at the substance of what you’re charging.

If a “waiting list fee” is really a non-refundable charge that a family has to pay to get a funded place, it’ll be caught by the same rules that catch registration fees i.e. you can’t gate the funded entitlement behind it. If it’s genuinely optional, refundable, or it relates only to privately paid provision, you’re on safer ground, subject again to the consumer-law fairness test.

If waiting list fees are part of your model, this is exactly the kind of thing worth having someone look at rather than guessing. The line between “fine” and “your council intervenes” is narrow.

“Which extras can we actually charge for – meals, nappies, trips?”

This is where most operators want clarity, and the good news is the permitted list is reasonably generous.

Alongside the funded hours you can charge parents for:

• consumables the child uses – nappies, sun cream and the like;
• meals and snacks; and
• optional activities – events, celebrations, and specialist tuition such as music classes or a foreign-language session, as long as they aren’t part of what’s needed to deliver the EYFS itself.

You can also, of course, sell additional privately paid hours at your normal rates.

The catch is in the conditions, and these are not optional.

Every one of those extras has to be genuinely voluntary. Parents must be able to opt out, and if they do, their child still has to receive the same quality of provision as everyone else.

You also have to offer a reasonable alternative to each charge, which means letting parents supply their own nappies or packed lunch, for example, or waiving the cost. And none of it can ever be a condition of accessing the free place. If you make extras compulsory, that’s precisely the trigger for your council to step in.

There’s a practical point hiding in here too.

“Voluntary with a free alternative” only works if your day actually runs that way – if a child whose parents declined the trip is left without meaningful provision, you’ve got a problem regardless of what your policy says on paper.

“Costs are up. Can we add a ‘sustainability’ or ‘enrichment’ charge?”

This is the big one, and it’s the question where we most often have to deliver news operators don’t want to hear.

No.

This is the exact practice the DfE moved to shut down. The guidance now expressly prohibits general, non-itemised charges layered on top of the funded hours, and it names them: “sustainability” charges, “enrichment” charges, “business continuity” charges, “additional charges”, charges for “enhanced ratios” and any other supplementary charge or hourly rate bolted onto the free entitlement.

It even catches any fee that isn’t specifically identified and itemised as one of the permitted extras above.

We understand entirely why these charges sprang up. Funding rates haven’t kept pace with the cost of running a setting, and operators have been trying to bridge the gap. But a flat “sustainability fee” applied to funded children is now squarely against the rules, and it’s an easy thing for a council to spot. If margins are the issue, the answer has to come from genuinely optional, itemised extras and your privately paid provision – not from a top-up dressed up under another name.

“How many children are we actually registered for?”

Operators are often surprised by the answer. If you run a group setting, your Ofsted registration certificate doesn’t carry a maximum number of children at all. It simply records that you must comply with the EYFS. So there is no single “registered number” to read off the certificate.

Instead, your lawful capacity is dynamic. It’s primarily set by two things working together, and it can change from session to session depending on who’s in the building:

• Indoor space – the EYFS sets minimum usable floor area per child, broadly 3.5m² for under-twos, 2.5m² for two-year-olds and 2.3m² for three- to five-year-olds. That’s net usable space, so storage, corridors and toilets don’t count.
• Staff-to-child ratios – the familiar ones, 1:3 for under-twos, 1:5 for twos and up to 1:13 for threes and fours in a qualifying group setting.

Whichever of those bites first on a given day is your ceiling for that day. A Monday morning heavy with babies and a Tuesday afternoon full of pre-schoolers can have very different maximum numbers in the same rooms.

A few things to keep in your back pocket.

Childminders are the exception – there the law does set a hard cap of six children under the age of eight at any one time (with the usual allowances for siblings and the childminder’s own children).

Ofsted also keeps a reserve power to require a particular setting to run higher ratios where it judges that necessary for children’s safety, and it can attach conditions, suspend a setting or take enforcement action.

So “Ofsted doesn’t set a number” doesn’t mean “anything goes” – it means Ofsted regulates the inputs and trusts you to do the arithmetic correctly, then checks that you have through mechanisms.

If you’re buying or selling a nursery, this matters more than people realise. You cannot value a setting off a “registered for X children” figure, because there isn’t one. Real capacity has to be worked out from the usable floor area against the age bands and ratios, and then sense-checked against the actual layout.

We see deals where the assumed capacity and the lawful capacity are not the same number — and that feeds straight into occupancy assumptions and price.

Also remember to check your lease (if operating via a lease) and the council’s planning permission (including any conditions attached) for any restrictions on your capacity numbers, or ask us to do so for you.

“Has Ofsted changed how it inspects us?”

Yes – and this is genuinely new, so don’t confuse it with the capacity point above.

From November 2025, Ofsted moved to its reformed inspection approach. The headline change for early years is that inspectors now grade you across distinct evaluation areas using a new scale. For leadership and governance, that’s expected standard, needs attention or urgent improvement, and safeguarding is reported simply as met or not met. The old single “overall effectiveness” judgement of outstanding-to-inadequate has gone.

The part that bites commercially is the link to funding. Your council can decline to fund, or withdraw funding for, providers that receive certain “specified grades” – for example, urgent improvement in leadership and governance, or a safeguarding judgement of not met. So, an inspection outcome is no longer just a reputational matter. That makes getting your governance and safeguarding evidence in order ahead of an inspection more important than ever.

Getting it right in practice

Pulling the threads together, here’s the compliance backbone the charging rules expect you to have:

• Published charges – your fees for consumables, meals, optional activities and any additional hours need to be published – on your website, or via your local authority’s Family Information Service. The DfE even provides a template for setting them out (smaller settings caring for ten or fewer children at a time can usually be exempted from publishing online).
• Itemised invoices – bills should break down clearly into funded hours, privately paid hours, food, non-food consumables and activities, so a parent can see plainly that their funded hours cost them nothing.
• A parental declaration – completed before a child starts, recording their funded hours, the pattern of attendance and any optional extras the family has chosen to pay for.
• An alternatives policy – so that for every chargeable extra there’s a real, free route for families who’d rather not pay.

Get those four things in place and you’re most of the way to a defensible position.

A closing thought

None of this is meant to make running a nursery sound like a minefield. The rules are logical once you hold onto the funded-versus-private distinction – the funded hours have to be free and clean, and everything genuinely optional lives clearly alongside them, properly itemised and properly transparent.

Where operators come unstuck is in the grey middle: the “sustainability” charge that feels reasonable, the deposit that’s quietly non-refundable, the capacity figure nobody’s checked against the floor area. That’s the kind of thing a good adviser should help you see clearly and fix early, not so you can tick a box, but so the money side of your setting is built on something solid.

If any of these questions are live for you right now, whether you’re tightening up your fees, preparing for an inspection or weighing up buying or selling, our nursery team would be glad to talk it through.

Alternatively, make use of our Nursery T&Cs Review Service which you can access here.

This article is general information about the position in England and is correct to the best of our knowledge as at June 2026. It isn’t legal advice, and rules change, so please take advice on your own circumstances before acting.