Guidance

DSG: conditions of grant 2026 to 2027

Published 17 December 2025

Applies to England

1.  Summary

The Department for Education (DfE) has prepared these conditions of grant to assist local authorities in the operation of the dedicated schools grant (DSG) which is payable to local authorities under section 14 of the Education Act 2002. The conditions of grant have been updated for the 2026 to 2027 financial year.

1.1  Expiry or review date

These conditions of grant will operate for the 2026 to 2027 financial year but section 5.2 may be revised in spring 2026.

1.2  Who is this publication for? 

This publication is for local authorities.

1.3 Important points 

These conditions of grant have been revised for the 2026 to 2027 financial year to update the dates and the relevant website references.

Condition 3.6, sections 6 and 7, has been revised to change and clarify the methodology for allocating additional high needs funding to special schools and alternative provision (AP) and special units/resourced provision in mainstream schools.

There is a new grant condition relating to early years provision. With effect from 1 October 2026, a local authority must ensure that early years providers (including childminders) are paid monthly for funded entitlements if they so request.

2.  Terms on which the grant is paid 

The formal terms of grant given by the Secretary of State under section 16 of the Education Act 2002 state that: 

1: We will pay the grant as a ring-fenced specific grant, and it must be used in support of the schools budget as defined in the School and Early Years Finance (England) Regulations 2026. It can be used for no other purpose.

2: At the end of the 2026 to 2027 financial year the Chief Finance Officer (CFO) of the local authority is required to append an additional note to the statement of accounts confirming the deployment of the DSG in support of the schools budget as required by the  Accounts and Audit (England) Regulations 2015. The CFO is also required to confirm the final deployment of the DSG in support of the schools budget. 

3: The Secretary of State reserves the right to recover the grant where there is evidence that a local authority has used it for any purpose other than to support the schools budget or has failed to comply with any other condition of grant.

3.  Grant  allocation and payment 

3.1  Purpose of the grant 

The grant is paid in support of local authorities’ schools budgets. It is the main source of income for the schools budget. 

Local authorities are responsible for determining the split of the grant between central expenditure and the individual schools budget (ISB) in conjunction with local schools forums. Local authorities are responsible for allocating the ISB to individual schools in accordance with the local schools’ funding formula. 

Local authorities can add to the schools budget from local sources of income, subject to the provisions below.

3.2  Allocation of grant to local authorities 

The methodology underlying the allocation of DSG to individual local authorities can be found in the 2026 to 2027 DSG technical note.

3.3  Payment arrangements 

We will pay the grant to local authorities in 13 instalments on the dates set out in the annex. Initial payments will be based on the total DSG allocation notified in December 2025 minus the total share of the ISB recouped for academies, as submitted by each local authority on their authority proforma tool (APT) in January 2026, and deductions for high needs places and business rates. 

The basic method for calculating recoupment will be to take the ISB share calculated by the local authority from the APT in January 2026 excluding business rates. We plan to publish detailed recoupment guidance for 2026 to 2027 in February 2026.

We will make recoupment adjustments throughout 2026 to 2027 as further schools convert to academies. These will be based on the converted school’s share of ISB, excluding business rates, and will be proportional to the period of the financial year for which the school is an academy.

3.4 Allocation of grant to schools by local authorities 

Local authorities retain responsibility for setting the overall level of their ISB and for determining schools’ budget shares, subject to the School and Early Years Finance (England) Regulations 2026. 

Each local authority scheme for financing schools must contain a provision which sets out the frequency with which the budget share will be made available to governing bodies of maintained schools.

3.5 Transfer of funds between DSG funding blocks 

The following conditions apply to the transfer of funds between the 4 DSG funding blocks: 

1. Subject to the paragraphs below, local authorities must not allocate money designated in the DSG settlement tables as schools block to items of spend other than budget shares for mainstream primary and secondary schools (excluding funding for nursery classes and for places reserved for pupils with special educational needs), or money retained centrally for growth and falling rolls in schools, as defined in Schedule 2 to the School and Early Years Finance (England) Regulations 2026. 

2. Local authorities may allocate up to 0.5% of money designated as schools block to other items with the consent of the schools forum.

3. Local authorities must consult with all local maintained schools and academies if they propose to allocate schools block money to other items. The schools forum must take into account the outcome of that consultation before deciding whether to give their consent. 

4. The local authority can apply to the Secretary of State for permission to allocate schools block money to other items if they do not secure the consent of the schools forum as above, or if they wish to allocate more than 0.5% of the schools block money to other items (in which case they must still obtain and report the views of the schools forum). In the case of the Secretary of State giving such permission, this may be for all or part of the sum requested by the local authority and may be given subject to conditions.

3.6 Determination of the local schools funding formula and funding for high needs pupils 

The following conditions apply in relation to setting the local funding formula, and the funding for high needs pupils. 

3.6.1 The local authority must maintain a single formula for funding both maintained schools and academies in its area.

3.6.2 In constructing the formula, the local authority must take account of the circumstances of all academies and maintained schools in its area.

3.6.3 When spending DSG centrally on duties relating to all schools (as set out in Schedule 2 to the School and Early Years Finance (England) Regulations 2026), the local authority must treat maintained schools, including voluntary aided schools and foundation schools, and academies on an equivalent basis 

Schools such as voluntary aided schools, foundation schools, and academies, cannot therefore be charged for services that are provided free of charge to community and voluntary controlled schools, and paid for out of the centrally held DSG. 

This does not include funding that has been retained centrally from maintained school budgets only (as set out in Schedule 2 to the School and Early Years Finance (England) Regulations 2026), where some statutory duties relate to community and voluntary controlled schools only. 

However, in these situations authorities should not charge voluntary aided and foundation schools if requested to provide services to these schools and where there is no charge to community and voluntary controlled schools for the same service.

3.6.4 The local authority must treat children and young people with high needs on a fair and equivalent basis when making arrangements for their funding, regardless of whether they are placed in maintained schools, academies and free schools, providers in the further education (FE) sector, or non-maintained and independent provision (in referring to all these types of schools and providers in the subsequent paragraphs of this section, the term ‘school or college’ is used). 

3.6.5 The local authority, in deciding on top-up funding rates for the pupils to be placed in its maintained special schools, special academies it previously maintained and special free schools located in its area, must not reduce the budget of any special school such that it would be lower in financial year 2026 to 2027 than in financial year 2025 to 2026, if all the pupils in the special school were placed by the local authority, and the number and type of places remained the same in the 2 financial years 2025 to 2026 and 2026 to 2027.

The special school budget for this purpose excludes the additional allocation of funding per place for 2026 to 2027 required by paragraph 3.6.6  below.

This gives effect to the special schools minimum funding guarantee (MFG) protection, which is set at 0% for 2026 to 2027. The local authority can apply to the Secretary of State to set a specified percentage reduction instead.

3.6.6 The local authority must calculate and pay:

(a) to each of their maintained special schools and pupil referral units, special academies and AP academies they previously maintained or that are located in their area, special and AP free schools in their area, and hospital schools and the equivalent academies in their area, an allocation of high needs funding which is equivalent to an amount of funding per place – that amount is to be calculated by dividing the sum of the funding listed in subparagraphs (i) to (iv) below with the number of places funded in 2025 to 2026 – multiplied by the number of places that are being funded in 2026 to 2027:

(i) the amount of historic teachers’ pay and pension (employer contribution) funding allocated to each school by the local authority for the period April 2025 to March 2026

(ii) any historic teachers pensions supplementary fund also allocated by the local authority in the period April 2025 to March 2026 

(iii) the local authority’s allocation of additional funding pursuant to the 2022 autumn statement also allocated by the local authority in the period April 2025 to March 2026

(iv) the authority’s allocation of the 2025 to 2026 core schools budget grant (CSBG), with the 7-month 2025 pay award element funded through the CSBG converted to a full-year (12-month) amount – which means that a percentage increase of 47% is applied to that element of the 2025 to 2026 CSBG funding

(b) to each new special or AP free school opening in their area between April 2026 and March 2027, an allocation of high needs funding to reflect the funding identified in paragraph 3.6.6(a)(i) to (iv) above.

The minimum 12-month amount must be £4,048 per place,^{[footnote 1]} multiplied by the place number used by DfE for funding the free school in that period, which will have been prorated for the number of months that the free school is open in the period April 2026 to March 2027.

This additional high needs funding as calculated under the provisions of paragraphs (a) and (b) above is separate from both the £10,000 per place funding and top-up funding, and:

• must not result in a reduction to the number of places for which £10,000 per place is allocated to a school, or the amount per place allocated to a hospital school, or the top-up funding allocated to a maintained school, academy or free school in respect of their individual pupils; and

• must be disregarded in applying the protection for special schools set out in section 3.6.5 above

The local authority can apply to the Secretary of State to adjust this requirement.

3.6.7 The local authority must also calculate and pay to each of their maintained mainstream schools, mainstream academies they previously maintained or that are located in their area, and mainstream free schools in their area, which contain approved special educational needs (SEN) units or resourced provision, an allocation of high needs funding which is equivalent to £539 per place,^{[footnote 2]} multiplied by the area cost adjustment (ACA) relevant to the school, and the place numbers used for funding maintained schools by the local authority, and for funding academies and free schools as published by DfE, in the period April 2026 to March 2027, prorated as necessary from the 12-month equivalent to the number of months the unit or provision will be open if less than 12 months. The local authority may also include any place numbers funded locally by the local authority which are not included in the published numbers.

This additional high needs funding is separate from both the £6,000 or £10,000 per place funding and top-up funding, and must not result in a reduction to the number of places funded or to the top-up funding allocated to a maintained school, academy or free school in respect of their individual pupils.

The local authority can apply to the Secretary of State to adjust this requirement.

3.6.8 When a pupil who requires top-up funding has already been placed in a school or college and is in receipt of top-up funding from the local authority at 31 March 2026, the local authority must continue the agreement with the school or college to make top-up payments until the pupil has left the school or college, or the agreement is replaced by another. The local authority must likewise enter into such an agreement when a pupil is placed by the local authority in a school or college at a later date.

3.6.9 The local authority must make high needs top-up payments in a timely fashion on a basis agreed with the school or college. These must be monthly unless otherwise agreed.

3.6.10 The Secretary of State reserves the right to impose more specific conditions of grant on individual local authorities in relation to the use of DSG for top-up funding for pupils and students with high needs, where she believes that the actions of the local authority are unreasonable, specifically in relation to the  failure of the authority to  determine and pay top-up funding in a timely manner, where a pupil or student has already been placed by the local authority in a school or college.

3.7 Allocations  to academies 

In some circumstances local authorities need to make direct payments to academies. In the 2026 to 2027 financial year these will include: 

• top-up funding for pupils with high needs and additional high needs funding calculated under sections 3.6.6 and 3.6.7
• funding calculated under the early years funding formula (EYFF)
• payments for pupils admitted who have been excluded from other schools 
• any allocations from the local authority’s growth fund or falling rolls fund

4.  Use of grant monies 

Local authorities have continuing responsibility for financial regularity in maintained schools. Section 151 of the Local Government Act 1972 requires the local authority to appoint an officer responsible for making the necessary arrangements for local financial and management controls; this person is usually known as the CFO. Under these arrangements the CFO will need to ensure that the grant monies are spent on the purpose for which they are intended. 

In particular, the CFO will need to ensure that expenditure charged to the schools budget falls within the definitions set out in regulations 6 and 7 of the School and Early Years Finance (England) Regulations 2026. In August 2027, DfE will provide local authorities with an outturn assurance statement for the CFO to sign to certify the actual deployment of the DSG.

Under  the Accounts and Audit (England) Regulations 2015  a local authority is required to undertake an annual review of its system of internal control. It is also required to report, with its annual accounts, on its arrangements in an annual governance statement (AGS) which must be prepared in accordance with proper practices as published by the Chartered Institute of Public Finance and Accountancy (CIPFA.) In undertaking such reviews and preparing their AGS, local authorities should consider the arrangements for allocating DSG/budget shares to schools including procedures for ensuring the robustness of pupil data. Local authorities should be able to provide evidence that demonstrates that they have effective procedures for forecasting pupil numbers at school level, if required to do so by their own internal auditors or external auditors.

5.  Accounting

5.1 Year end procedures

Local authorities are responsible for ensuring that the DSG is deployed in support of the schools budget. This includes both DSG funding allocated to central expenditure within the schools budget and funding for the ISB.

In principle, all DSG funding must be allocated to the schools budget in the year in which it is paid to the local authority by DfE. Where the final adjusted DSG payment for the year exceeds the local authority’s original budget provision, the local authority, after consulting the schools forum, may carry the additional grant forward to the following financial year. 

Grant allocated through the ISB will automatically count as expenditure in support of the schools budget and will have to be allocated to budget shares in the year in question. Where actual schools’ expenditure exceeds the ISB this will normally be financed by a net reduction in schools’ reserves.  

Conversely, where actual schools’ expenditure falls short of the ISB, this will be explained by a net increase in schools’ reserves. 

At the end of the financial year the central expenditure element of the schools budget may be under or overspent. If there is an underspend in respect of central expenditure at local authority level this should be separately identified within the associated notes to the accounts. The underspend must be carried forward to support the schools budget in future years, including any of the budget that is moved into earmarked reserves.

The way in which local authorities account for DSG deficits has been altered by the  Local Authorities (Capital Finance and Accounting)(England) (Amendment) Regulations 2020 (SI 2020 No 1212), made by the Ministry of Housing, Communities and Local Government (MHCLG),which require DSG deficits to be held in a separate reserve in local authorities’ accounts. This is now the accounting treatment that local authorities must follow while those regulations are in force. MHCLG have extended these regulations up to and including the accounts for 2027 to 2028.

However, the way in which local authorities should plan their management of DSG and report to DfE remains governed by the School and Early Years Finance (England) Regulations 2026.

Under regulation 8 of and Schedule 2 to the School and Early Years Finance (England) Regulations 2026, local authorities are required to carry forward overspends to their schools budget either in the immediately following year or the year after. They can apply to the Secretary of State to disregard this requirement.  

In the case of the Secretary of State giving such permission, this may be for all or part of the sum requested by a local authority, and permission may be given subject to conditions.

The impact of these provisions means that a local authority with a DSG deficit from the previous year must either: 

• carry the whole of the deficit forward to be dealt with in the schools budget for the new financial year 
• carry part of it forward into the new financial year and the rest of it into the following financial year 
• carry all of it into the following financial year, or
• apply to the Secretary of State under the regulations for authorisation to disregard the requirements in regulation 8 and Schedule 2 relating to deficits if it wishes to fund any part of the deficit from a source other than the DSG

The Accounts and Audit (England)Regulations 2015  incorporate a requirement for a note to the statement of accounts confirming actual deployment of the DSG. The guidance on this and the illustrative table have been amended so that the note shows both the formal accounting position (under the MHCLG regulations) and the total surplus or deficit for the purpose of DfE regulations.

5.2 Further conditions relating to special educational needs and disability (SEND) and alternative provision (AP) 

All local authorities must co-operate with DfE in relation to any policy or financial intervention regarding their management of SEND and AP, including DfE regions group local improvement and intervention programmes. Additionally, the 32 local authorities in the SEND change programme must co-operate with DfE in relation to that programme.

Any local authority that has an overall deficit on its DSG account at the end of the 2025 to 2026 financial year, or whose DSG surplus has substantially reduced during the year, must co-operate with DfE in handling that situation. In particular, the local authority must: 

• provide information as and when requested by DfE about its plans for managing its DSG account in the 2026 to 2027 financial year and subsequently 
• provide information as and when requested by DfE about pressures and potential savings on its high needs budget 
• meet with officials of DfE as and when they request to discuss the local authority’s plans and financial situation 
• keep the schools forum regularly updated about the authority’s DSG account and plans for handling it, including high needs pressures and potential savings

The Secretary of State reserves the right to impose more specific conditions of grant on individual local authorities that have an overall deficit on their DSG account, where she believes that they are not taking sufficient action to address the situation. 

5.3  Further conditions relating to additional allocations of DSG 

If the Secretary of State provides an additional allocation of DSG to a local authority, she may attach further conditions to that allocation beyond those set out in this document.

5.4 Repayment of DSG 

The Secretary of State reserves the right to recover the grant where there is evidence that a local authority has used it for any purpose other than to support the schools budget. 

The Secretary of State may require the local authority to repay as much of the DSG as considered reasonable in the following circumstances: 

• the local authority fails to comply with any of the conditions of the grant 
• the local authority fails to use the DSG for the purposes for which it is given 
• the external auditor indicates that they are not satisfied with the treatment of DSG in the local authority accounts

5.5 Local  authority reporting requirements 

Local authorities are not required to produce separate final accounts for schools’ expenditure or for the use of the grant. 

The grant received from DfE and its deployment between central expenditure and the ISB should be clearly identifiable within the additional note to the local authority’s statement of accounts to demonstrate compliance with the limit on central items. Local authorities should refer to CIPFA’s statement of recommended practice (SORP) guidance note for practitioners. 

At outturn stage the CFO is required via a signed statement to confirm final deployment of the DSG in support of the schools budget and in accordance with grant conditions.

5.6 External  audit arrangements 

Appointed auditors are responsible for auditing the financial statements of each local authority and for reaching a conclusion on the local authority’s overall arrangements for securing economy, efficiency and effectiveness in the use of resources. The deployment of, and accounting for, DSG in support of the schools budget, and the arrangements for securing economy, efficiency and effectiveness in DSG and schools’ expenditure fall within the scope of the work that appointed auditors may plan to carry out, having regard to the risk of material error in the local authority’s accounts and significance to overall arrangements for securing value for money.

Local authorities should maintain proper arrangements to ensure value for money. They should also provide assurance to DfE that the grant is being deployed in accordance with grant conditions, so DfE can provide appropriate assurance to Parliament. 

DfE is subject to external audit by the National Audit Office (NAO) to support Parliament’s need for assurance about DfE’s grant funding to schools. From time to time the NAO may need to undertake audit work, for example on local authorities’ disbursement and monitoring of the grant, and its deployment in maintained schools.

Annex: DSG payment dates for financial year 2026 to 2027

The percentage of allocation figures are approximate as adjustments, particularly for recoupment, will take place throughout the year.

Table: DSG payment dates for financial year 2026 to 2027

Instalments	Payment date	Percentage of allocation
1	07 April 2026	12%
2	05 May 2026	8 %
3	03 June 2026	8 %
4	03 July 2026	8 %
5	05 August 2026	8 %
6	03 September 2026	8 %
7	05 October 2026	8 %
8	04 November 2026	8 %
9	03 December 2026	8 %
10	05 January 2027	8 %
11	03 February 2027	8 %
12	03 March 2027	8 %
13	22 March 2027	adjustments

1. The £4,048 comprises £660 covering the funding referred to in 3.6.6 (a)(i) and (ii), £340 covering the funding referred to in 3.6.6(a)(iii) and £3,048 covering the CSBG funding referred to in 3.6.6(a)(iv). ↩

2. The £539 comprises the £286 per place that mainstream schools received through the National Insurance contributions grant and the £253 per place (full-year equivalent) they received through the school budget support grant, in both cases if they had a special unit or resourced provision. ↩