Guidance

Inclusive early years fund for 2026 to 2027: methodology

Published 25 March 2026

Applies to England

Overview

In February 2026, we announced the inclusive mainstream fund, worth over £500 million per year. As part of this, the inclusive early years fund will provide £47 million of additional early years funding in 2026 to 2027 to support the early years sector to become more inclusive of children with special educational needs and disabilities (SEND).

The split between early years, schools and post-16 was calculated based on the numbers of children in that phase. This funding will be distributed via the inclusive early years fund which will be paid to local authorities, who will in turn pass funding on to providers in accordance with the terms set out in the inclusive early years fund conditions of grant.

This guide explains how we have calculated inclusive early years fund funding rates for each local authority.

Eligibility for the grant

All local authorities in England that fund the government’s early years entitlements are eligible to receive the inclusive early years fund and will be required to pay early years providers. This is accordance with Inclusive early years fund 2026 to 2027: conditions of grant and operational guidance for local authorities to guide local authority funding distribution.

The Isles of Scilly and City of London are excluded from these allocations as their funding arrangements are managed separately.

Funding rates methodology

This section sets out the methodology used to calculate local authority level rates per part-time equivalent (PTE), including the data sources, formula structure and factor weightings.

Data sources

For consistency across early years funding arrangements, we have chosen to use data that are also used within the 2026 to 2027 3 and 4-year-old early years national funding formula (EYNFF).

These data sources are:

• universal hours PTEs for 3 and 4-year-olds recorded in the January 2025 school, early years, and alternative provision censuses
• the 2026 to 2027 3 and 4-year-old area cost adjustment (ACA)
• free school meals (FSM) eligibility, based on the measure used for FSM in performance tables
• disability living allowance (DLA) entitlement data for 3 and 4-year-olds

Further details on the specifics of each data source can be found within the:

• 2026 to 2027 early years national funding formulae: technical note
• Early years funding rates and step-by-step calculations 2026 to 2027 for the local authority level data

We are allocating funding based on 3 and 4-year-old universal hours PTEs because, as a universal offer, this represents a full cohort of children and there is an increased likelihood of identifiable SEND needs emerging at this age. However, while we recommend the funding is distributed based on 3 and 4-year-old universal entitlement PTE numbers, the funding is intended to help providers adopt setting-wide inclusive practices for all early years’ entitlements-funded age groups and should be used to benefit children across the setting.

Formula structure

The formula used to distribute the inclusive early years fund is a simplified version of the 3 and 4-year-old EYNFF made up of 3 factors, a:

• base factor, weighted 75%
• FSM factor, weighted 13%
• DLA factor, weighted 12%

The weightings differ from those used in the EYNFF because this funding is designed specifically to support inclusive practice, whereas the EYNFF funding rates are for core activities. These factor weightings are derived from internal modelling that made use of published special educational needs (SEN) prevalence data. The aim of these weightings is to ensure the resulting formula, that is the weighted combination of the formula factors above, produces a distribution of funding rates that reflects our best estimate of the relative levels of need between local authorities.

We also make use of the 3 and 4-year-old 2026 to 2027 area cost adjustment, to reflect relative differences in costs between local authorities.

The data used for FSM eligibility and DLA are the same as are used in the 3 and 4-year-old EYNFF.

Free school meal eligibility

FSM eligibility, based on the measure used for FSM in performance tables. These data are used as a proxy for relative levels of deprivation across the country or low-level SEN. As there are no comprehensive FSM data available for children across all early years settings, data for this factor are based on the proportion of full-time children eligible for FSM in state-funded nursery and primary schools.

Disability living allowance entitlement

DLA entitlement data for 3 and 4-year-olds, which are used to proxy for relative levels of more complex SEND across the country.

Methodology description

For each local authority, we begin by estimating the number of PTEs for each factor by multiplying the relevant additional needs factor proportion by the number of universal hours PTEs. For example, for a local authority with 2,000 PTEs and an FSM eligibility rate of 50%, the estimated FSM PTEs would be 1,000.

Next, we calculate the national total PTEs for each factor by summing the relevant additional needs factor PTEs across all local authorities.

Next, for each factor, we calculate the funding rate per PTE as:

1. national funding total for the factor (that is, £47 million, multiplied by the relevant factor weighting as listed earlier

2. divided by

3. the national sum of each local authority’s PTE for the factor multiplied by each local authority’s ACA

This results in 3 factor rates, which are (rounded to the nearest penny):

Funding factor	Rate per PTE
Base	£41.61
FSM	£28.80
DLA	£152.63

From these factor rates, we then calculate local authority-specific rates per-PTE for each factor. This is done separately for each local authority by multiplying each factor rate by the local authority’s ACA. Doing this step allows us to account for relative cost differences between local authorities. For example, for a local authority with an ACA of 1.5, their FSM rate per-PTE would be £43.20.

From these local authority-specific factor rates, we calculate allocations for each factor for each local authority. These are calculated as the local authority-specific factor rate per-PTE multiplied by the local authority’s PTEs for the factor. Combining the examples from before, for a local authority with 1,000 FSM PTEs and an FSM rate per-PTE of £43.20 (unrounded), the funding the early years would receive through the FSM factor would be £43,203.

To calculate the final rates per-PTE for each local authority, we must calculate the total allocations from each funding factor and then divide this by the local authority’s universal hours PTEs and then round to the nearest penny. For example, if the sum of a local authority’s base, FSM and DLA factor funding were £186,250, and this local authority had 2,000 universal hours PTEs, their final rate per-PTE would be £93.13.

These calculations result in a national average rate per-PTE of £61.88 based on January 2025 universal hours PTEs.

Local authority funding to providers

Local authorities should refer to the Inclusive early years fund 2026 to 2027: conditions of grant and operational guidance for local authorities which set out the permitted use of the funding and detail how it should be passed on to providers.