The funding environment for early years providers in 2026 has undergone a significant strategic shift. Moving away from the fragmented, child-by-child application processes of the past, the current government framework is prioritising "inclusion by design."
For managers, this means the landscape is now split into two distinct, yet complementary, streams: the Inclusive Mainstream Fund (IMF) for schools and the Inclusive Early Years Fund (IEYF) for early years settings.
Understanding the Split: IMF vs. IEYF
While both funds share the overarching goal of supporting children with Special Educational Needs and Disabilities (SEND) and Social, Emotional, and Mental Health (SEMH) needs, the delivery mechanisms for schools and early years settings are purposefully different to reflect their unique operational contexts.
The Inclusive Mainstream Fund (IMF): For Schools
The IMF is directed toward state-funded primary and secondary schools as part of a wider annual package.
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The Mechanism: Funding is allocated via local authorities (for maintained schools) and directly to academy trusts.
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The Requirement: Schools are required to publish an "Inclusion Strategy" by December 2026. This strategy must outline how the school will use its core funding and the new IMF to embed inclusive practice across their cohort.
The Inclusive Early Years Fund (IEYF): For Early Years Settings
Recognising the specific needs of the 0–5 sector, the government has launched the IEYF to provide additional funding for the 2026–2027 financial year.
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The Mechanism: Unlike historical application-heavy processes, this funding is designed to be upfront and setting-wide. It is not intended to be tied to individual child diagnoses or statutory panels, which have historically created significant administrative burdens.
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The Focus: The IEYF is intended to help providers invest in strategic planning, workforce development, and environmental adaptations that benefit all children, regardless of their specific stage of development.
Why the Difference Matters for Your Setting
The Department for Education’s approach distinguishes between the two based on the developmental reality of the children involved. In early years, where children are often yet to receive a formal diagnosis, the IEYF prioritises early intervention and the creation of "emotionally safe" environments that can adapt to emerging needs before they escalate.
For the nursery manager, this represents a major shift:
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Reduced Admin Burden: You are no longer expected to build your inclusion budget solely by "chasing" individual EHCP-linked applications.
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Strategic Autonomy: You are encouraged to invest in setting-wide improvements—such as sensory-aware spaces or staff training in relational practice—that support the whole cohort.
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Accountability via Transparency: While the funding is more flexible, you must remain transparent. Local authorities will oversee usage through proportionate reporting, often utilising existing accountability mechanisms.
Strategic Leadership Checklist for 2026
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[ ] Review Local Allocation: Confirm with your local authority how they have chosen to distribute the IEYF. Allocations vary by area
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[ ] Shift from 'Individual' to 'Whole-Setting': Audit your current inclusion spending. Start mapping how IEYF resources can be used for broad staff development that benefits every room.
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[ ] Collaborate, Don't Compete: Ensure you understand how local schools' IMF inclusion strategies might overlap with yours, particularly during the transition phase for children moving into Reception.
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[ ] Prepare Your 'Impact Summary': Be prepared to demonstrate to your local authority how these funds have contributed to a more inclusive environment or improved staff confidence in adaptive teaching.
The Bottom Line: The 2026 funding architecture is designed to reward settings that think systemically. By moving from a "react-and-apply" model to an "invest-and-embed" approach, you are not only securing your financial sustainability but also creating the foundational environment required for every child to thrive.
Sources:
Department for Education (2026a) Early years funding: 2026 to 2027. Available at: https://www.gov.uk/government/publications/early-years-funding-2026-to-2027
Department for Education (2026b) Inclusive early years fund: 2026 to 2027: conditions of grant and operational guidance for local authorities. Available at: https://www.gov.uk/government/publications/inclusive-early-years-fund-2026-to-2027/inclusive-early-years-fund-for-2026-to-2027-conditions-of-grant-and-operational-guidance-for-local-authorities
Department for Education (2026c) Inclusive mainstream fund for schools: methodology 2026 to 2027. Available at: https://www.gov.uk/government/publications/inclusive-mainstream-fund-2026-to-2027/inclusive-mainstream-fund-for-schools-methodology-2026-to-2027
Thrive (2026) Inclusive Mainstream Fund (IMF) and Inclusive Early Years Fund (IEYF) support. Available at: https://www.thriveapproach.com/inclusive-mainstream-fund