Guidance

Early years National Insurance contributions and teachers' pay grant methodology: April 2025 to March 2026

Published 22 May 2025

Applies to England

1. Introduction

This document sets out the methodology for the early years National Insurance contributions and teachers’ pay grant (EY NTPG).

This includes guidance on how we will allocate funding for the 12 month period from April 2025 to March 2026. This document was initially published on 18 March 2025, but has been revised and reissued, along with revised funding rates.

For the financial year 2025 to 2026, we are distributing an additional £40 million to local authorities through the EY NTPG grant – made up of £25 million in respect of increased National Insurance contributions (NICs) costs announced in the autumn 2024 budget and £15 million following the 2025 teachers’ pay award.

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

• maintained schools and academies (including governor-run academies)

• maintained nursery schools

2. Paying the grant

The EY NTPG funding will be paid to local authorities who will then be required to distribute this funding to eligible early years settings in their area. We have published a rate per part-time equivalent (PTE) per age cohort for each local authority who will be required to pass this funding in full to eligible early years settings based on local PTE data. We expect all local authorities to notify eligible early years providers in their area of their EY NTPG rates as soon as is possible in order to help with local business planning.

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 1 payment to cover the 2025 to 2026 financial year.

3. Funding Rates

For the EY NTPG, the approach to distribution of funding has been developed in line with previous grants. As with both the early years core entitlements funding and previous early years grants, EY NTPG  funding will be distributed at local authority level.

There will be a separate national base rate per PTE for each age group: under 2s, 2-year-olds, and 3-and-4-year-olds. The total EY NTPG funding available for each age group is calculated in the following way:

1. First, we derive a notional funding total for each age group using the PTE data described in section 5 and the relevant 2025 to 2026 dedicated schools grant (DSG) average hourly funding rates.

2. Next, we calculate the percentage of the total notional funding calculated above for each age group.

3. Finally, the total EY NTPG funding is then apportioned by these percentages to derive the total funding available for each age group.

The national base rate per PTE for each age group are then derived by dividing the total funding for each age group by area cost adjustment (ACA) weighted PTEs for the age group. To reduce the administrative burden on local authorities, funding for NICs and teachers’ pay has been combined by calculating and distributing a single rate per PTE to cover the full financial year. This has been achieved by stretching the funding available for the 7 month period (September 2025 to March 2026) in respect of teachers’ pay across the full 12 months to produce a single full-year combined rate.

These national base rates are as follows:^{[footnote 1]}

• £ 94 for 3-and-4-year-olds
• £ 132 for 2-year-olds
• £ 173 for under 2s

For this grant, we have used the schools ACA rather than the early years ACA. The early years ACA is influenced by private, voluntary and independent (PVI) providers premises related costs, whereas this grant provides additional funding to school-based settings only. Full detail of the schools ACA can be found in the 2025 to 2026 technical note. We have used a slightly modified version of the schools ACA that is detailed in the technical note, that is we calculated a single ACA measure for part fringe local authorities, to align with the local authority level funding approach for EY NTPG.

The national base rates will be multiplied by the ACA to provide each local authority their own rate per PTE per entitlement, and these local authority rates will then be used in the subsequent allocations. We have published the tables detailing the EY NTPG rates for each local authority.

4. Allocations

Local authority allocations will be determined using the same PTE data sources used to develop the national base rates and local authority level rates referenced in section 4.  

We will pay the EY NTPG to local authorities in a single payment in September 2025, to cover the 2025 to 2026 financial year. This allocation will not be adjusted.

The PTE data sources are as follows:

Data	Source
3 to 4-year-old (universal and additional hours)	January 2024 schools census, January 2024 early years census - governor-run settings only
2-year-old FRAS [footnote 2]	January 2024 schools census, January 2024 early years census - governor-run settings only
2-year-old working parent	autumn 2024 schools census
Under 2s working parent	autumn 2024 schools census

5. Contact us

If you have any questions after reading this guidance, please contact us via our Customer Help Portal.

1. The base rates used in the calculation of local authority level rates are unrounded but are presented here rounded to the nearest pound. ↩

2. FRAS – families receiving additional support (formerly referred to as the ‘2-year-old disadvantaged’ entitlement. ↩