Private day nurseries eligible for claiming Employment Allowance at increased rate
Following lobbying from NDNA, the Government has issued further specific guidance around eligibility of private and voluntary run nurseries across the UK for the National Insurance Contributions (NIC) Employment Allowance.
Although the NIC will increase for employers from April 2025, the Employment Allowance (EA) will also increase from £5,000 per employer to £10,500. This could significantly help smaller single site nurseries to cover their increased NIC costs.
NDNA has repeatedly asked HMRC for guidance on which nurseries would be eligible for this allowance and has briefed MPs to ask searching questions during Parliamentary debates.
Following this lobbying, NDNA received a letter from the James Murray, the Exchequer Secretary to the Treasury, promising to review the guidance for employers. Nurseries delivery publicly funded childcare will not be subject to the general rule that businesses with more than 50% of their income from public funds would not be eligible. This is due to the private agreements between nurseries and parents.
Some nurseries working within the public sector will not be eligible for the Employment Allowance.
Here is the latest information from the Government regarding Employment Allowance which gives useful examples of which businesses will be able to claim and those that won’t:
This includes the following detail:
- If you are currently eligible to claim Employment Allowance, you will continue to be eligible under the new rules. The changes announced at the Budget last year widen eligibility.
- Private day nurseries and other private early years providers will not usually come within the “public sector” rules.
- Lots of early years providers receive income via Government-funded childcare places, but receiving Government funding is not, by itself, an indicator that work is of a public nature.
- Businesses only need to think about any Government funding they receive when 50% or more of their business activities involve the performance of functions of a public nature. The provision of childcare by a private business to members of the public would not be considered a function of a public nature.
- Early years childcare providers are entitled to claim the Employment Allowance if they are private businesses or charities.
NDNA’s CEO Purnima Tanuku CBE said: “We have worked hard to get some clarity on this issue of the Employment Allowance for nurseries across the UK. It’s clear now that the vast majority of nurseries will be able to claim this allowance. This is great news for smaller employers for whom this payment will cover if not all then most of the NIC increases from April.”
This week ahead of another NIC legislation debate in Parliament, NDNA is again briefing MPs on the challenges nurseries will face from April 2025 with increased employment costs and now in England a tightening up of guidance which makes it clear to parents that charges for meals and consumables are voluntary.
The new guidance makes it much more difficult for nurseries to remain sustainable ahead of the final phase of childcare expansion in September when all eligible children from aged nine months are entitled to 30 hours of funded childcare per week.
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