Guidance

Early years National Insurance contributions and teachers’ pay grant: conditions of grant for the 2025 to 2026 financial year

Published 22 May 2025

Applies to England

1. Introduction

1.1 Legislation

The early years National Insurance contributions and teachers’ pay grant (EY NTPG) will be paid by the Secretary of State for Education as a grant under section 14 of the Education Act 2002. In accordance with section 16 of the act, the Secretary of State attaches the following terms to the grant payable.

1.2 Purpose

The EY NTPG is a standalone grant of £40 million for 2025 to 2026 to support public sector EY settings with increased costs in that year. The grant is made up of £25 million to support eligible providers with the increased employers’ National Insurance contributions (NICs) costs from April 2025, and £15 million to support with the 2025 teachers’ pay award for the period from September 2025 to March 2026.

1.3 Period

These conditions of grant cover the financial year 2025 to 2026.

2. Eligibility

2.1 Types of settings

The EY NTPG will provide additional funding in respect of public sector EY provision for the following settings:

• schools (both maintained and academies)

• governor-run academies and maintained nursery schools

3. Payments

3.1 Calculations

Allocations of this grant have been calculated using the methodology provided in the EY NTPG methodology document. This document includes part-time equivalent (PTE) rates for each of the entitlements for each local authority.

3.2 Payment timetable

The EY NTPG funding will be paid to local authorities who will then be required to distribute this funding, in full, to eligible early years settings. Local authorities will receive one combined allocation and payment for NICs and teachers pay and should pass on to providers in a similar manner. 

Local authority level allocations for this grant will be published in May 2025.

We will pay the grant to local authorities in September 2025. This payment is separate to the entitlements funding rates announced in December 2024 and, as such, local authorities are not expected to amend their local funding formulae.

Local authorities will receive one payment to cover the 2025 to 2026 financial year. As set out in the methodology document, this payment will be based on part-time equivalents (PTEs) from the January 2024 schools and early years censuses, and the autumn 2024 schools census. The allocation will not be adjusted.

4. Assurance

4.1 Eligible spend

Local authorities must ensure that all the EY NTPG funding they receive is distributed to eligible EY providers listed in section 2.1 in their area using local part-time equivalent (PTE) data in conjunction with the rates information which have been published by DfE in the methodology document.

Local authorities will receive one allocation per age group, based on the published PTE rate per entitlement. Authorities should pass on the same rate to providers based on local PTEs. When calculating local allocations, local authorities should note that allocations are based on data from the January 2024 census, and the autumn 2024 schools census.   

The EY NTPG must not be used for contingency funding or local authority central or administration costs. The grant is separate to the dedicated schools grant (DSG) entitlement funding for 2025 to 2026, announced in December 2024, and as such local funding formulae do not need to be adjusted.

4.2 Carry forward

Funds must not be carried forward past 31 March 2026.

4.3 Records required

Local authorities are required to maintain and keep clear records of income and expenditure in relation to this grant.

5. Further information

Books, other documents and records relating to the recipient’s accounts shall be open to inspection by the Secretary of State and by the Comptroller and Auditor General. 

The Comptroller and Auditor General may, under section 6 of the National Audit Act 1983, carry out examinations into the economy, efficiency and effectiveness with which the recipient has used its resources. 

Local authorities and schools shall provide information as may be required by the Secretary of State to determine whether they have complied with these conditions.

6. Variation

The basis for allocation of grant may be varied by the Secretary of State from that set out above, if so requested by the local authority.

7. Recovery of funds

If a local authority or setting fails to comply with the terms and conditions set out in this document, the Secretary of State may recover some or all of the EY NTPG that has been allocated. This will be notified in writing to the local authority, school or college. 

Recoveries will be made by invoice or by offsetting the amount against subsequent payments due from the department. 

The recipient must notify DfE immediately through the Customer Help Portal  if it becomes aware of any instance of error, suspected fraud or financial irregularity in the use of the funds.

8. Overpayments

If a local authority identifies that it has been overpaid, it must contact DfE to arrange repayment of the excess. Where DfE identifies an overpayment, it may seek to recover the excess. The local authority will be notified of this in writing.

9. Enquiries

For queries relating to these terms and conditions please use the Customer Help Portal.