The Budget Fairy has been – and this year’s update brings a number of headline changes that nursery owners will need to plan for ahead of the new tax year in April. From wage increases to dividend tax, pension reforms and employee ownership shifts, there is a clear theme: higher operational costs with limited offset from funding rises.
Watch Leah’s video about the Autumn Budget and what that means for nursery owners:
Below is a straightforward run-through of everything that directly affects nurseries, staff teams, limited company owners and potential buyers.
National Living Wage Increases
One of the biggest changes for nurseries is the rise in the National Living Wage and apprentice rates.
- Apprentices: £7.55 to £8.00
- Ages 18–20: £10.00 to £10.85
- Ages 21+: £12.21 to £12.71 Leah AB
For context, employing an 18-year-old full-time (40 hours, year-round) will cost an additional £2,065 per year after April. Funding increases will not fully cover these rises, so many nurseries will need to adjust parent fees or absorb growing staffing costs.
Personal Tax Threshold Frozen Until 2031
The personal allowance is now frozen until 2031.
This means that apprentices and younger staff earning more under the new wage rates will also find themselves paying more tax. It’s a double hit: higher wage bills for employers and higher tax deductions for staff.
Dividend Tax Increases for Limited Company Owners
Those operating as limited companies and withdrawing dividends should note:
- The £500 dividend allowance remains unchanged
- Basic and higher dividend tax rates are increasing by 2% from April
For someone withdrawing £130,000 in dividends per year, this represents an additional £2,362 in tax.
Pension and Inheritance Tax Changes
Unspent pension pots will now fall within inheritance tax calculations.
For nursery owners with a SIPP or property held within a pension structure, this is a significant shift—those assets will now form part of your taxable estate when you pass away.
In short: historic planning routes to avoid inheritance tax will no longer be valid, and new strategies will be required.
Property and Savings Income Tax Increase
From April, income earned from property or savings will be subject to an additional 2% tax.
This will particularly impact investors purchasing nurseries via property portfolios, as rental or investment income will be taxed more heavily. Buyers may see reduced net returns, which could influence acquisition appetite.
Employee Ownership Trusts (EOTs) – Major Update
Employee Ownership Trusts (EOTs) continue to gain attention in the nursery sector, but there is a significant change:
- Capital Gains Tax relief for sellers is dropping from 100% to 50%
- Expected from April, though no confirmed date yet
If you are currently in the middle of selling your goodwill to your staff team under an EOT model, urgently speak with your accountant to understand how this affects your tax position.
Full Expensing and Capital Allowances Continue
The government has confirmed that full expensing on capital allowances will continue permanently.
This allows limited companies to deduct the full cost of refurbishment and investment—good news for owners expanding, acquiring new settings, or planning improvements.
Pension Salary Sacrifice Changes Coming in 2029
From 2029, limited company directors using salary sacrifice to contribute more than £2,000 per year into pensions will face:
- Employer NI
…on those contributions.
This isn’t immediate, but directors should start planning ahead.
Fuel Duty and Electric Vehicles
Two additional cost considerations for nurseries operating minibuses or company cars:
- Fuel duty rises by 5p from September next year
- Electric vehicle duty will move to 3p per mile, though not until April 2028
For settings with school runs, after-school clubs or multiple sites, these operational costs will need factoring into budgeting for 2025–26.
Final Thoughts
This Budget brings the familiar challenge of rising costs without equivalent funding uplift. Staffing will become more expensive, tax burdens will increase for owners, and investors will see slightly reduced returns.
Understanding the full impact early means you can prepare your budgeting, pricing strategy and long-term planning accordingly.
If you’d like a deeper breakdown of what this means for your nursery or your future plans, get in touch and we’ll be happy to help.
