Costs and Forecasting for Childcare on Domestic Premises (CoDP)

1. Pre-Opening Capital Expenditure (The Setup Costs)

Before you welcome your first cohort of children under your new CoDP registration, you will face several one-off “sunk costs.”

Planning Permission and Legal Fees

Unlike standard childminding, which usually falls under “incidental use” of a residential property, a CoDP setting with five staff and potentially 15–20+ children will almost certainly require Planning Permission for Change of Use.

• Cost Estimate: Expect to pay between £500 and £1,500 for the application and associated floor plans.

• Tip: Factor in the cost of a planning consultant if your local council is particularly strict about traffic and noise.

Ofsted Registration Fees

The registration fee for Childcare on Domestic Premises is significantly higher than the standard childminder fee. As of 2026, the fee for the Early Years Register for group providers is £220, compared to the £35–£103 range for childminders.

Premises Conversion

To accommodate a larger team and more children, you may need to invest in:

• Fire Safety: Interlinked smoke alarms, fire doors, and clearly marked exit routes.

• Toileting/Changing: Increasing the number of low-level toilets or nappy changing stations to meet the increased capacity.

• Zoning: Investing in high-quality room dividers or storage to create distinct “learning zones” as required by the EYFS.

• Budget: A modest conversion usually ranges from £2,000 to £7,000, depending on the current state of your home. To help with the initial budgeting, our guide to childminder start-up costs provides a useful baseline.

2. Fixed Monthly Overheads: The “Hidden” Costs

Once you are operational, your monthly “burn rate” will increase dramatically.

Business Rates

This is the one that catches most providers off guard. Once your home is primarily a business, the Valuation Office Agency (VOA) may assess the part of your home used for childcare for Business Rates.

• 2026 Update: The 2026 Revaluation is now in effect. However, many small providers will still benefit from Small Business Rate Relief if their rateable value is below £12,000.

• Forecasting Tip: Check your future rateable value on the GOV.UK website to ensure you don’t have an unexpected bill in Year 2.

Commercial Insurance

A standard childminder policy will not cover a CoDP setting. You will need a bespoke group policy that includes:

• Public Liability: Usually a minimum of £5 million to £10 million.

• Employers’ Liability: A legal requirement the moment you have assistants.

• Forecasting: Expect premiums to jump from roughly £80 per year (for a solo childminder) to £400–£800 per year for a CoDP.

3. Staffing: Your Largest Expense

In a CoDP setting, staff wages will account for 60% to 75% of your total turnover.

The Cost of the “Rule of Five”

To operate as a CoDP, you must have at least five adults on-site. If you are paying the National Living Wage (which has seen significant increases into 2026), your monthly payroll will be substantial.

• Don’t forget the “On-Costs”: You must budget for Employer National Insurance (NI) and Pension Contributions (currently 3% for the employer).

• The “Hidden” Staff Cost: You must also forecast for staff training and the cost of safeguarding compliance, ensuring every member of the team is vetted and trained to a high standard.

4. Revenue Forecasting: The Income Side

To balance these high costs, your revenue model must be precise. In 2026, your income will likely come from two main streams:

Private Fees

With the rising cost of living, your private hourly rates must be carefully calculated. As of April 2026, average nursery fees in England have reached approximately £7.50–£9.00 per hour, depending on the region. As a home-based “boutique” setting, you may be able to charge a premium for your smaller, more intimate environment.

Government Funding (The 15/30 Hour Entitlement)

The expansion of funded childcare for children from 9 months old has changed the game.

• The Good News: The government funding rates for 2026–2027 have been adjusted to better reflect the cost of delivery.

• The Challenge: Funding is rarely enough to cover total costs. Most successful CoDP providers use “consumables charges” for meals, trips, and nappies to bridge the gap.

5. Forecasting for Profitability

To see if the move is worth it, you need to perform a “Break-Even Analysis.”

Total Income – (Staff Costs + Food + Rent/Mortgage Share + Utilities + Resources + Insurance) = Net Profit.

If you find that the margins are too thin for a 5-person team, you may need to reconsider your ratios. While you must always stay within the legal limits, many providers ensure they have a mix of age groups to maximise their ratio compliance. For example, having more 3-and-4-year-olds (ratio 1:8 or 1:13 depending on staff qualifications) can help subsidise the high cost of caring for babies (ratio 1:3).

6. Professionalising Your Business Model

Operating a business of this scale on a spreadsheet is no longer viable. To maintain your profit margins, you need robust systems. This is why many providers choose to invest in pre-written policies and procedures; it saves dozens of hours of administrative time that you could otherwise spend on marketing or fee collection.

If the financial complexity of a home-based nursery feels like a lot to handle, it is worth exploring our Open a Nursery from Home (CoDP) course, where we provide specific financial templates and calculators designed for this model.

Summary

The jump from childminder to CoDP is a transition from being an “educator with a business” to being a “business owner who educates.” The costs are higher, the regulations are tighter, and the management is more complex.

However, by accurately forecasting your staffing costs, accounting for business rates, and leveraging the new 2026 funding rates, you can build a highly profitable, sustainable childcare business that serves your community and provides a significantly higher income than working alone.

If you are looking at these numbers and thinking you might eventually want to move into a commercial building instead, take a look at our free guide on how to open a nursery in the UK to compare the two models side-by-side.