Is Your Contract Illegal? The 2026 Rules on 'Top-Up Fees' vs. 'Consumables'

The Top-Up Trap: Navigating the New DfE Rules on Childcare Invoicing

If you offer 15 or 30 hours of funded childcare, you are intimately familiar with the struggle of the 'funding gap.' The hourly rate provided by local authorities frequently fails to cover the actual costs of providing high-quality care, especially in areas with high overheads.

For years, many providers bridged this gap by charging a 'Top-up Fee'—asking parents to pay the difference between the government rate and their private hourly rate. However, under strict new guidance from the Department for Education (DfE) and the Competition and Markets Authority (CMA), mandatory top-up fees are illegal. If your contract is not worded correctly, you could be in breach of your funding agreement and at risk of an investigation.

[!TIP] Your contract is the first line of defence for your business. This article is a deep dive for our Ultimate Guide to Childminder Contracts & Policies.

The 'Top-Up' Trap: What Is Banned?

You cannot require a parent to pay a fee that covers the delivery of care during a funded hour. HMRC and the CMA view this as creating a financial barrier to a 'free' entitlement.

• Illegal Example: 'My hourly rate is £8, but the funding only pays £6. You must pay an extra £2 per hour as a Mandatory Service Charge to secure your place.'

This type of bundling is precisely what the CMA is currently investigating. If a parent is forced to pay to access their funded hours, the place is no longer 'free' at the point of delivery.

The 'Consumables' Solution: What Is Allowed?

While you cannot charge for the delivery of care, the government explicitly acknowledges that the funding does not cover the additional costs of running a setting. You are permitted to charge parents for 'Additional Services' or 'Consumables.' This includes:

• Healthy meals and snacks
• Nappies and wipes
• Suncream
• Trips and outings
• Specialist tuition (e.g., Forest School or music classes)

Legal Example: 'Your 15 hours of care are fully funded. However, I charge a separate "Consumables Package" of £2.50 per hour to cover organic home-cooked meals, nappies, and our weekly trip to the local farm.'

The Catch: Voluntary and Itemised

To remain compliant, your invoicing must be transparent. You cannot simply send a bill for a 'Monthly Total.' Your invoice must clearly show the funded hours as £0.00 and list the 'Consumables' as a separate, itemised line.

Furthermore, these charges should ideally be voluntary. Parents must be given a reasonable alternative—such as bringing their own packed lunch—if they choose not to pay the consumables charge. If a parent has no choice but to pay the fee to access the funded place, the DfE may argue it is a disguised top-up fee.