Families across the UK are set to benefit from a record £9.5 billion investment in early years childcare next year, as the government steps up efforts to make childcare more affordable and
support parents into work.
The funding, announced by the Department for Education, represents an increase of more than £1 billion on this year’s budget and will support nurseries and childminders to deliver the childcare places families need across the country.
More than half a million families have already benefited from the rollout of 30 hours of funded childcare since September, with parents saving up to £7,500 a year per child. From next year, higher hourly funding rates—rising by 4.3% for children under two and up to nearly 5% for three- and four-year-olds—are intended to help providers expand capacity and maintain high-quality care.
Ministers say the investment is part of a long-term plan to build a childcare system that works for families in every community, while ensuring providers receive more of the funding directly. Councils will be limited to retaining no more than 3% of funding for central services, increasing the share that reaches nurseries and childminders.
The announcement follows recent changes to childcare support through universal credit, including the lifting of the cap alongside the two-child limit. Parents with more than two children will now receive an additional £736.06 per child in childcare support.
Further reforms include the expansion of school-based nurseries and the rollout of free breakfast clubs, which the government estimates could save parents up to £450 a year while freeing up time at the start of the school day.
Secretary of State for Education Bridget Phillipson said: "High-quality childcare is the first building block of national renewal, and central to how we get tens of thousands more children school ready by age five. It shapes children’s futures, it strengthens working families, and it supports communities across our country.
That’s why we are delivering a record £9.5 billion investment in early years, with nurseries and childminders receiving higher hourly funding rates. This is more money going straight to the frontline, helping providers grow, improve and offer every child the best possible start.
This is how we build a brighter future for our country – by investing in children, backing families and restoring opportunity from day one".
Chief Executive of NDNA Tim McLachlan said: "We are pleased that the government has listened to the early years sector and will pay above inflation increases to hourly funding rates which should help providers to pay the statutory wage uplift for the majority of practitioners. With the mandatory pass-through rate set at 97% for next year, nurseries who are struggling with rising costs should notice the difference.
Staffing costs make up the bulk of nurseries’ outgoings. With the government purchasing 80% of early years places, it’s vital they get the funding rates right so that nurseries can deliver these places, remain sustainable and invest in their staff to deliver high quality provision for our children.
We also welcome the additional money to bolster the Early Years Pupil Premium to support disadvantaged children, something NDNA has been campaigning for over many years. Investing more in a child’s earliest years gives them the best life chances and saves money in their later education".
Sarah Ronan, Executive Director, Early Education and Childcare Coalition, comments: "We are pleased that the government has listened to our members about the cost pressures the sector has faced in the last year. The further uplift in the Early Years Pupil Premium is also very welcome. This additional funding for disadvantaged children will be vital in ensuring that every child gets the best start in life, no matter their background.
Combined, these measures represent a positive step in the right direction. Every pound that the Treasury has invested today will produce benefits that we will reap for years to come through improved child outcomes and increased parental employment.
We look forward to next year’s funding consultation as an opportunity to build on today’s announcement and secure the long-term reforms that will ensure the ambition of the Best Start in Life Strategy is fulfilled".
On average, local authorities will see funding increases of 4.95% for three- and four-year-olds, 4.4% for two-year-olds and 4.3% for children aged nine months to two years. Additional support for disadvantaged children will also increase, with the Early Years Pupil Premium rising by 15% to £1.15 per hour from 2026–27—worth up to £655 per eligible child each year.
The measures form part of the government’s wider Best Start in Life strategy, which aims for 75% of children to reach a good level of development by age five by 2028, and complement broader efforts to tackle child poverty through expanded free school meals and improved access to breakfast clubs.