How to Start a Nursery in the UK

Is Starting a Nursery Right for You?

Demand for childcare is strong wherever there are working parents, and the expansion of funded hours in England has sent more families looking for places than many areas can supply. The people who do well are experienced early years practitioners, often a deputy or manager who has run someone else's rooms and wants to run their own, with someone who can handle the money. What parents, inspectors and staff are really judging is whether the setting is safe, calm and well organised.

The honest part is that a nursery is a building full of fixed costs. Rent, wages and insurance are due however many children are in the baby room, the ratios mean you cannot cut staff when numbers dip, and recruiting and keeping qualified practitioners is the sector's constant struggle. Fees are paid in advance, but funded hours are paid by the council at a rate you do not set, which many providers say does not cover their costs. Owners who last watch occupancy, ratios and wage costs every week.

Most people open a nursery after years in the sector, and a few come from teaching or another business and hire an experienced manager. Either way, the manager has to hold an approved Level 3 qualification and the setting has to meet the Early Years Foundation Stage from day one, so the team matters more than the building. Some start smaller, as a childminder or a preschool in a hired hall, and move into a full day nursery once they know the market and the regulator.

Qualifications, Registrations and Rules

• Ofsted registration in England. A day nursery in England must be registered on the Early Years Register before it opens. The online application covers the organisation, its nominated individual and each setting, and Ofsted then checks suitability, including enhanced DBS checks with barred lists, health declarations and references, before a registration visit. Ofsted's published aim is twelve weeks from accepting a complete application, and it advises allowing longer.
• The Early Years Foundation Stage. The EYFS statutory framework sets the learning and development and the safeguarding and welfare requirements every registered setting must meet. That means a manager with an approved Level 3 qualification and at least half of other staff at Level 2 or above, ratios that depend on the children's ages and staff qualifications, a key person for every child, and the records Ofsted inspects.
• Paediatric first aid and safeguarding. At least one person with a current full paediatric first aid certificate must be on the premises whenever children are present and on every outing, and staff who qualified recently need the certificate to count in the ratios. Every setting needs a designated safeguarding lead, a safeguarding policy that follows the local safeguarding partnership's procedures, and staff who know how to report a concern.
• Scotland, Wales and Northern Ireland. In Scotland a day care of children service registers with the Care Inspectorate and staff register with the Scottish Social Services Council. In Wales day care for children registers with Care Inspectorate Wales. In Northern Ireland nurseries register with the early years team of the local Health and Social Care Trust. Each has its own qualifications, ratios and timescales, so start with the regulator's guidance.
• Premises, planning and building regulations. A nursery in England falls within planning use class E, so a former shop or office may not need a change of use, but a house, church hall or new building usually does, and Scotland and Wales use different classes, so ask the planning authority first. Alterations need building regulations approval, fire safety needs a risk assessment, and Ofsted will want to see the premises before registering them.
• Food registration and funded hours. If you prepare meals or snacks you must register as a food business with the local council at least 28 days before you start, and your kitchen will be inspected. To offer government-funded childcare hours you also sign a provider agreement with the local authority, which usually requires Ofsted registration and sets how you claim and how you may charge for extras.

Setting Up the Business

• Limited company, partnership or something else. Most nurseries are limited companies, which suits a business with a lease, employees and liabilities, and some are community interest companies or charities run by committees. Ofsted registers the organisation and its nominated individual, so form the company before you apply and take an accountant's advice on structure and directors' pay.
• HMRC, VAT and payroll. Register for Corporation Tax and set up PAYE before the first employee starts, because a nursery is a payroll business from day one, with pensions, holiday pay and apprentices to handle. Nursery fees from a registered provider are usually exempt from VAT, which means you also cannot reclaim VAT on the fit-out and equipment, so ask an accountant who knows the sector.
• Bank account, bookkeeping and fee collection. Open a business account early, choose bookkeeping software and decide how fees are collected, usually monthly in advance by direct debit or through nursery management software that also handles registers, invoices and funded hours claims. Chasing late fees is unpleasant and common, so the terms, the deposit and the payment method should be settled before the first child starts.
• Insurance. The EYFS requires appropriate insurance such as public liability for every premises you use, employers' liability is a legal requirement from the first employee, and most nurseries add contents, business interruption and cover for outings. Insurers will ask about your policies, staff checks and the building, so arrange cover once those are in place and before the registration visit.
• Data protection and consent. You will hold children's dates of birth, medical needs, dietary requirements, photographs and family details, much of it special category data, so you need a privacy notice, a records policy, secure systems and usually the annual data protection fee paid to the Information Commissioner's Office. Take written consent for photographs and decide how long you keep records after a child leaves.
• Policies, software and the paperwork Ofsted reads. Before the registration visit you need the policies the EYFS requires, from safeguarding and complaints to medicines, behaviour and missing children, plus risk assessments, staff files and a plan for delivering the curriculum. Nursery management software for registers, learning journals, invoicing and funded hours claims is a category nearly every setting now uses, and choosing it early saves work later.

Start-up Costs and What You Need

The premises dominate. Whether you lease a former shop, buy a house with planning permission or build, the fit-out has to meet the EYFS and building regulations: child-sized toilets and nappy changing, a kitchen, sleep areas, secure entry, outdoor space, flooring and furniture that survive toddlers, and fire safety throughout. Add the resources for every room, cots, outdoor equipment, a laundry, kitchen equipment, signage and the technology for registers and parent updates.

Staffing is the largest running cost and starts before the first fee arrives. The manager is usually recruited months ahead to lead the registration, room leaders need to be in post for the registration visit, and the ratios mean a half-full room costs nearly as much to staff as a full one. Add recruitment advertising, DBS checks, training, uniforms, pensions, holiday pay and the cover you need when staff are off sick.

Then there is the wait. Rent, wages and insurance run for months before opening and a new nursery rarely opens full, so the working capital to cover the first year's shortfall is often larger than the fit-out. Price every line yourself from landlords, suppliers, the regulator's fee pages and local wage rates, add a contingency for a delayed registration or a room that fills slowly, and have an accountant test the plan at several occupancy levels.

Pricing Your Work

Nursery fees are set per session, usually a full day, a morning or an afternoon, and often by age, because babies need more staff than preschoolers. Work out the cost of running each room at realistic occupancy, including wages, ratios, food, consumables, rent and a share of the manager, insurance and software, then divide by the sessions you expect to sell. That tells you whether local parents' fees can support the rooms you plan, before you build them.

Funded hours complicate the arithmetic. The council pays an hourly rate it sets, and the provider agreement limits what you may charge on top and usually requires charges for meals, consumables or extra hours to be optional and clearly itemised. Read your local authority's agreement and the Department for Education's guidance before you set fees, show funded and paid hours separately on invoices, and model the mix room by room, because a room full of funded places can lose money.

Put the commercial terms in writing in a parent contract: a registration fee or deposit and when it is returned, the notice period for leaving or reducing sessions, how fees rise each year, what happens on bank holidays, sickness and closures, and late collection charges. Parents sign more readily in the spring for a September start when the terms are plain, and clear terms are what the Competition and Markets Authority expects of a consumer contract.

Finding Your First Customers

• A registration-of-interest list before you open. A nursery is one of the few businesses that can fill up before it opens, because parents arrange childcare months ahead. The moment you have premises, put up a sign with the opening date, launch a page that captures the child's date of birth, start date and sessions wanted, and send those families updates as the rooms take shape.
• Local parent networks. Parents ask other parents first, in local Facebook and WhatsApp groups, at baby classes, toddler groups and the school gate. Introduce yourself to the people who run those groups, offer to host a stay-and-play before opening, and make sure the first families are happy enough to say so where other parents listen.
• The council's Family Information Service and directories. Councils in England run a Family Information Service, or similar, that lists registered childcare for parents, and the devolved nations have similar services, so get listed the day registration is confirmed. Parents also compare settings on daynurseries.co.uk and similar directories, so complete your profile with real photographs, fees and sessions.
• A website and a show-around booking. Parents search for nurseries in their town months ahead, usually at night on a phone, and shortlist the settings whose website answers the first three questions, ages, fees and whether there is a place, and lets them book a show-around online. A Google Business Profile with the opening date does the same job in the map results.
• Employers, schools and the show-around itself. Large local employers often list nurseries for staff, and primary schools without a nursery class sometimes point parents to local settings. Whatever brings a family to the door, the show-around is where they decide, so the manager leads it, the rooms are calm and the fees and next step are explained before they leave.

Your Website and Online Presence

A nursery website has two audiences before it opens: parents deciding whether to register interest, and the practitioners you need to hire. For parents it needs the ages you will take, the opening date, the planned fees, how funded hours will work at your setting with a link to the government's eligibility checker, the manager's name and qualifications, photographs of the rooms and a form that captures the child's date of birth and the sessions wanted. For staff it needs honest job descriptions and an application form that works on a phone.

Launch it months before opening, worded carefully: describe the setting and take registrations of interest, but do not call yourself registered or take bookings for care until Ofsted or your regulator confirms it, then switch the wording that day and add the inspection report when it comes. Keep fees and term dates somewhere you can update yourself. Our guides to a coming soon page and the startup website checklist cover the launch, and DigitalPod builds websites for nurseries across the UK, working entirely online.

When you are ready for a website, our startup nursery website design page explains what a new nursery needs on day one, our nursery website design page covers the full picture for an established business, and nursery website design prices sets out what it costs. Startup websites start from £2,400, and our startup website checklist lists what to have ready.

Mistakes New Nurseries Make

• Signing a lease before checking planning use, building regulations and whether Ofsted will accept the premises, then paying rent on a building you cannot open.
• Applying to Ofsted before the manager, the DBS checks and the policies are ready, so the application stalls and the planned opening slips.
• Opening with empty rooms because the registration-of-interest list and the website came after the paint rather than before it.
• Setting fees from the nursery down the road rather than from your own staffing costs at realistic occupancy, then finding the baby room loses money.
• Treating staff as a cost to minimise, so turnover is high, ratios are met with agency workers and parents notice the faces keep changing.
• Keeping children's records, photographs and medical details on personal phones and in group chats, which breaks the data protection rules and your own safeguarding policy.

Your First 90 Days

1. Research the local market: which settings have waiting lists, what they charge, where working parents live and whether the council's childcare sufficiency report shows a gap.
2. Find premises and check planning use, building regulations, fire safety and outdoor space with the council before you sign, and plan the fit-out to the EYFS.
3. Form the company with an accountant's advice, open a business bank account, set up PAYE and bookkeeping and have the budget tested at several occupancy levels.
4. Recruit the manager early, obtain enhanced DBS checks for everyone connected with the registration and write the safeguarding and other policies the EYFS requires.
5. Submit the Ofsted application, or the equivalent in your nation, with the nominated individual, settings and governance details complete, and pay the fee promptly.
6. Register a .co.uk domain, following our guide to choosing a domain name, put up a Google Business Profile with the opening date and launch the website with a registration-of-interest form and careers page.
7. Set the fee schedule, deposit and notice periods, write the parent contract, decide how you will offer funded hours and contact the council's early years team about the provider agreement.
8. Register as a food business at least 28 days before opening if you will cook, arrange insurance, order resources and finish the fit-out in time for the registration visit.
9. Once registered, get listed with the Family Information Service and directories, run show-arounds for the families on your list and review occupancy and costs weekly through the first ninety days.