Maximising Nursery Funding: A Step-by-Step Guide

Maximising nursery funding does not mean finding extra money. It means being paid for every funded hour you actually deliver: a signed declaration for every funded child, a valid eligibility code at each check date, hours claimed that match the register, and extras charged in a way the council will accept. Most lost funding comes from a missed code check or a claim that doesn't match attendance, not from a missing scheme.

This guide is for providers in England. Scotland, Wales and Northern Ireland run different schemes. Your council's provider agreement sets the local detail, so check its deadlines and forms alongside the steps below.

The funded entitlements in England (October 2026)

Since September 2025 the working-parent entitlement covers children from 9 months old to school age, so most settings now have funded children in every room.

• 30 hours for working parents, 9 months to school age. Both parents (or a single parent) must be working and earning at least the equivalent of 16 hours a week at the National Minimum or Living Wage, and neither can expect adjusted net income over £100,000. Parents apply through their childcare account and get an eligibility code, which they must reconfirm every three months. See Free childcare if you're working.
• 15 hours for all 3 and 4-year-olds (the universal entitlement), from the term after the child's third birthday. Working parents of 3 and 4-year-olds can get a further 15 hours, making 30. See 15 hours free childcare for 3 and 4-year-olds.
• 15 hours for 2-year-olds whose families get extra support, for example families on Universal Credit with household income of £15,400 or less after tax, or children who are looked after, have an EHC plan or get Disability Living Allowance. See 15 hours free childcare for 2-year-olds.

All of these are based on 38 weeks a year. Families can take fewer hours a week over more weeks (a “stretched” offer) if you provide it, but they can't take more than 15 or 30 hours a week in fewer weeks. Children become eligible from the start of the term after they reach the qualifying age, with funding periods starting in January, April and September.

Alongside the entitlements, councils pass on supplementary funding for eligible children: the Early Years Pupil Premium, the Disability Access Fund and local SEN inclusion funding. The DfE's local authority funding operational guide for 2026 to 2027 explains how these are paid.

What isn't nursery funding: Tax-Free Childcare is a separate scheme that helps parents pay your fees (the government adds £2 for every £8 a parent pays in). It doesn't pay for funded hours and isn't claimed through your council. Employer childcare vouchers closed to new applicants on 4 October 2018; a few long-standing families may still use them, but they are not a funding stream to plan around.

Step 1: Get a signed declaration before the first funded session

The statutory guidance asks providers to complete a parental declaration with each family before a child first takes up a funded place, setting out the pattern of funded hours and any optional charges, and to review it with parents so it stays accurate. Most councils use their own form; the DfE also publishes a template in its model agreement. Without a signed, dated declaration, a claim for that child is hard to defend.

Practical habits: ask for the declaration at the same time as you agree sessions, make sure every parent with parental responsibility signs where your council requires it, record the date it was signed, and renew it when hours or charges change, not just at the start of the year.

Step 2: Check eligibility codes before each claim

Working-parent codes are checked by your council at fixed points in the year, at the start of each term and each half-term. A code that has lapsed because a parent didn't reconfirm moves into a grace period, after which the funding stops. Before every headcount:

• Validate every new code before the child starts funded hours.
• Note each code's validity end date and remind parents ahead of it.
• Act on any child your council's system shows as expired or in a grace period.

Step 3: Claim the hours children actually attend

Your claim should match your register. Councils commonly compare claimed hours with attendance records during audits, and adjust funding where they differ. Keep sign-in and sign-out times, record absences with reasons, and if a child's pattern changes, update the declaration and the claim together.

Step 4: Make your charges defensible

You can charge for meals, consumables such as nappies and sun cream, and optional activities, but these must be voluntary. You can't charge top-up fees or make extras a condition of the funded place. Publish what you charge for, offer an alternative for families who decline (such as bringing a packed lunch), and itemise invoices so the funded hours, paid hours, food, consumables and activities appear as separate lines.

Step 5: Plan your offer around your funding rates

Council hourly rates differ by age band and change each April. Compare the rate for each age band with your cost per child-hour, including staffing at the ratio that age requires. That tells you where funded places cover their costs and where paid hours and extras have to make up the difference, and it informs decisions such as whether to offer stretched places.

Step 6: Keep evidence organised from day one

Keep, for each funded child: the signed declaration, proof of date of birth seen, the eligibility code and the dates it was checked, the register for each funded term, and the invoices you issued. If you are selected for a council audit, that is most of what you'll be asked for.

Where software helps

Pigeonhole generates each family's declaration from the child's record and sessions, collects parents' signatures online, and keeps the signed copy and its approval history. Its Chrome extension fills in your council portal from the same data, and where your council uses the LiquidLogic portal it can also check your forms against the council's live register and lets you remind parents whose codes need attention. See childcare funding software for the full picture, or funding forms for how the forms work.