How to Start a Nursery Business: UK Licensing & Setup Guide

To start a nursery business in the UK, you need to choose your type of childcare setting, register with the relevant authorities, meet staffing and premises requirements, and set up your business finances.

This guide explains how to start a nursery business step by step and offers advice to help you avoid registration delays, unexpected costs, and compliance problems.

Key points

• Give yourself enough time to get things in order 🗓️
  Registration can take up to 12 weeks once your application is in, so factor that in when choosing an opening date.
• Your premises and staffing numbers are related 🧑‍💼
  How much space you’ve got and how many staff members you hire aren’t separate decisions. They cap how many children you’re allowed to take on.
• Your business setup affects many aspects of your admin 💼
  Choosing between a sole trader and a limited company has real consequences for what you file, when you file it, and how exposed you are personally if something goes wrong.
• You don’t need to wrestle with your business admin 🚀
  Registering a business, opening a business account, and preparing your budget all take time and effort you’d rather put into your Ofsted application. ANNA can take some of the weight off your shoulders.

How to start a nursery business in the UK

Here’s everything you need to know about starting your own nursery business, step by step.

Step 1: Decide what type of setting you’re opening

Before you register, decide which children your nursery will care for. This will affect the rules and regulations you need to follow.

The Office for Standards in Education, Children’s Services, and Skills (Ofsted) regulates childcare providers in England, and manages two childcare registers: the Early Years Register and the Childcare Register.

The Early Years Register

The Early Years Register covers children from birth to 31 August after their fifth birthday, and most nurseries fall under this register.

Being on the Early Years Register means you have to meet the safeguarding, welfare, and learning requirements set out in the Early Years Foundation Stage (EYFS) framework. These requirements cover staff qualifications, ratios, premises, and children’s learning and development.

The Childcare Register

If your nursery also takes on older children, for example through wraparound or holiday provision, you may need the Childcare Register too.

This register has two parts:

• The compulsory part, which covers children aged five to eight
• The voluntary part, which covers children aged eight and over

Step 2: Budget for setup and ongoing costs

Before setting your opening date, budget for:

• Disclosure and Barring Service (DBS) checks and EY2 applications
• Public liability and employer’s liability insurance
• Changes to the premises to meet EYFS space and safety requirements
• Staff recruitment, training, and Paediatric First Aid qualifications
• Furniture, equipment, and learning resources
• Outdoor play equipment where required
• Rent, utilities, food, wages, and other ongoing costs

Did you know?

Ofsted charges a £220 application fee to join the Early Years Register, then the same amount annually.

You may also have several months of costs before your first families start paying fees.

A nursery can have strong demand and still run into cash flow problems if the money going out arrives before the money coming in. It’s important to keep a close eye on your finances from the beginning, so you know what you can afford as the business grows.

💡 Did you know?

ANNA’s Auto Accountant sorts your expenses and flags what you can claim as you go, so you’re not untangling months of receipts when your first tax return is due.

Step 3: Choose a business structure and sort your tax setup

Once you’ve worked out your budget, you’ll need to decide how to structure your business. Your main options are to operate as a sole trader or set up a limited company.

A sole trader structure is relatively simple and gives you control over the business, but you’re personally responsible for its debts.

A limited company keeps the business legally separate from you, which can be useful as the nursery takes on employees, signs contracts, and commits to higher costs. It also comes with additional filing responsibilities.

Childcare is generally exempt from VAT, but still comes with other tax obligations.

If you’re self employed, you’ll need to register for Self Assessment. If you’re running a limited company, you’ll have Corporation Tax obligations instead.

You’ll also have to run payroll if you employ staff. You’ll need to register as an employer with HMRC before the first payday and arrange workplace pensions where applicable.

Step 4: Meet the premises and safety requirements

Your premises have to meet the relevant EYFS space and safety requirements before Ofsted can approve your setting. If you’re converting a property that wasn’t previously used for childcare, this can take some time.

The indoor space requirements are based on usable floor space. Storage areas, corridors, staff rooms, and toilets don’t count towards the total.

Here are the requirements:

Think about planning permission before you commit to a property. If you’re changing the use of a shop, office, or residential property, you may need permission from your local authority.

You’ll also need suitable fire safety arrangements, including clear evacuation routes, working smoke alarms, and a fire risk assessment. Additionally, entry and exit points have to be secure enough to prevent children from leaving the premises without supervision.

If you prepare or serve food, you’ll also need to register as a food business with your local authority and follow food hygiene requirements.

Outdoor space isn’t required in every setting, but if you provide it, it has to be safe and suitable for the children using it.

Step 5: Get your staffing and ratios right

Staffing is one of the highest costs for a nursery, so work out how many people you’ll need before deciding how many children you’ll take.

EYFS staff-to-child ratios depend on the children’s ages and, in some cases, the qualifications held by your staff. These ratios apply throughout the day, so your rota needs to allow for breaks and other staffing changes.

Here are the staff-to-child ratios:

Staff counted towards the ratios have to be aged 17 or over. Younger staff can work in the setting, but have to be supervised and can’t be counted in your ratios.

Volunteers, apprentices, and students on long-term placements can count towards ratios where appropriate, provided they’re competent and responsible enough.

Step 6: Sort insurance and safeguarding policies

You’ll need public liability insurance in place before you start caring for children.

If you employ staff, you’ll also need employer’s liability insurance. Depending on your circumstances, you may choose additional cover such as professional indemnity insurance or buildings and contents insurance.

You’ll also need written policies covering areas such as safeguarding, behaviour management, health and safety, complaints, and data protection. Ofsted will expect to see these during registration and can refer to them when assessing how your setting operates.

💡 Did you know?

You don’t have to write every policy from scratch. Local authorities and early years networks usually provide templates that you can adapt.

Step 7: Register with Ofsted

If you’re providing childcare for children under eight for more than two hours a day, you have to register with Ofsted unless an exemption applies. Running a setting without registration is a criminal offence.

Your application involves other people connected with the business. Anyone with governance responsibility, such as directors, partners, or committee members, has to complete an EY2 form and pass an enhanced DBS check with barred lists.

Your application also needs to include:

• Your business address and contact details
• The number of children you plan to care for and their age range
• Details of your staff, including qualifications and training
• DBS checks for people connected with the setting

Ofsted will review your application and check whether the people involved are suitable to work with children. If you’re registering on the Early Years Register, Ofsted will send your unique reference number (URN) by post after you apply, then arrange a registration visit before granting your registration and issuing your certificate.

If Ofsted has concerns, you’ll have 14 days to respond to a notice of intention to refuse. If the concerns aren’t resolved, Ofsted can issue a formal refusal, which you can appeal.

💡 Did you know?

Ofsted aims to register new providers within 12 weeks of receiving a complete application. The process can take longer if further checks or information are needed, so factor this into your opening date.

Launch your nursery with ANNA

Between DBS checks, EY2 forms, and inspection preparation, the last thing you need is your business finances adding to the pile. ANNA runs in the background so your books stay in order without you having to think about them.

Here’s what ANNA offers:

• Business registration: Register as a sole trader or limited company with ANNA, and have your paperwork handled while you’re focused on your Ofsted application
• Business account: Open a business account in minutes, with your nursery’s income and outgoings kept separate from your personal finances from day one
• Auto Accountant: Get your expenses categorised automatically as you spend and be prepared for your return
• Invoicing: Send professional invoices for term fees and deposits, and get reminders when a payment’s overdue
• Smart Pots: Set money aside automatically for upcoming tax bills, so a Self Assessment or Corporation Tax deadline doesn’t catch you off guard
• 24/7 tax support: Get help from a real person whenever you need it

Get started with ANNA today to sort all your admin before your nursery opens for business.