For most nurseries, pay is the biggest cost, so the change that matters most in the Budget on 28 October 2026 is the new National Living Wage. There's some help with taking on apprentices and young staff, a bigger business rates relief for the high street that doesn't cover nurseries, and a change for owners thinking about selling. This is each one, with the date it starts.
Pay goes up on 1 April 2027
| Age | From 1 April 2026 | From 1 April 2027 |
|---|---|---|
| 21 and over (National Living Wage) | £12.71 | £13.21 |
| 18 to 20 | £10.85 | £11.27 |
| 16 and 17, and eligible apprentices | £8.00 | £8.31 |
Each rate rises 3.9%. The government accepted the Low Pay Commission's recommendations in full. A full-time practitioner on the National Living Wage, working 37.5 hours a week, will cost about £29,460 a year in pay, employer's National Insurance and the minimum pension, £1,151 more than now. For a nursery with 10 such staff, that's about £11,510 more a year.
Our guide to staff ratios and the wage bill works through what that means for a whole nursery.
National Insurance stays as it is
The Budget says there's no increase to the headline rates of National Insurance, and HMRC's overview says the employer threshold, like most others, stays at its 2026 to 2027 level until the 2030 to 2031 tax year. So employer's National Insurance is still 15% on each employee's pay above £5,000 a year.
Help with apprentices and young staff
The Budget restates two payments for employers announced in the spring. Both are already running.
- £2,000 for a new apprentice. Employers that don't pay the apprenticeship levy, which only applies to pay bills over £3,000,000, get £2,000 for an apprentice aged 16 to 24 in England whose apprenticeship starts from 1 October 2026, as long as they hadn't worked for the nursery for more than 90 days before it started. It's paid in two parts, the first once the apprentice has completed 90 days.
- Up to £3,000 for hiring a young person who's been out of work. The Youth Jobs Grant is for 18 to 24 year olds who have been on Universal Credit for six months or more. The job must be at least 25 hours a week at the minimum wage or above. It's paid as £1,800 after about six weeks and £1,200 after about 18 weeks, and the scheme takes new vacancies across Great Britain until October 2028.
Business rates: the new relief doesn't cover nurseries
From 1 April 2027, Small Business Rate Relief gets more generous for retail, hospitality and leisure properties in England: no business rates up to a rateable value of £18,000, tapering to £21,000. Nurseries don't qualify. The government's definition says schools, creches, nurseries, colleges and universities don't count as retail, hospitality or leisure, because they aren't open to visiting members of the public.
So a nursery keeps the normal relief: no business rates on a rateable value of £12,000 or less, tapering to nothing at £15,000, if it's the business's only property. Separately, the Budget extends Supporting Small Business relief for one more year from 1 April 2027 for ratepayers who had it in 2023, so a nursery in that position keeps its protection for another year.
If you own the building and rent it to the nursery
Many owners hold the premises personally and charge the nursery company rent. From 6 April 2027, Income Tax on property income rises to 24%, 44% and 49% in England, Wales and Northern Ireland, two points more than the rates announced a year ago. These are Income Tax rates, so they apply where the owner holds the building personally.
If you're thinking of selling
The lifetime limit for Business Asset Disposal Relief falls from £1,000,000 to £500,000 for sales made from 6 April 2027, and the 18% rate stays. HMRC says special rules will apply to contracts entered into before 6 April 2027 that haven't completed by then. Our before and after calculator works it out for your own gain, and our study of who the new limit affects uses HMRC's figures on who claims the relief. For the rest of a sale, see our guide to selling a nursery.
Equipment and refits
The Annual Investment Allowance, which lets a business deduct the full cost of most equipment such as furniture, kitchens, play equipment and IT in the year it buys it, stays at £1,000,000 a year. The Budget's changes matter for spending above that: the first-year allowance on main rate equipment rises to 50% for spending from 1 January 2027, and the main writing-down allowance falls to 12% from 1 April 2027 for companies and 6 April 2027 for sole traders and partnerships. Cars don't qualify for the Annual Investment Allowance.
What the Budget doesn't cover
The Budget documents don't set the hourly rates councils pay for funded hours. The Department for Education publishes those separately each year. Our guide to early years funding explains how they work. The Budget's list of decisions does include funding for wider access to books for children aged 0 to 5. We'll update this page if anything else for nurseries is published.
This is general guidance, not advice. Your accountant can tell you what these changes mean for your own nursery.