The government has announced a significant shift in the taxation of private schools, with VAT now being charged on fees starting from January 1, 2025. This measure aims to prevent parents from avoiding the tax by paying fees in advance.
The new tax will apply immediately to any fees for the school term beginning January 2025, effectively closing a loophole that had allowed parents to circumvent the additional cost by paying up front. This move comes in response to the rising popularity of advance payment schemes, which private schools had promoted in anticipation of a Labour government. To address this issue, ministers have introduced anti-forestalling legislation that covers all fees paid from July 29 to the budget announcement on October 30.
Chancellor Rachel Reeves has indicated that the revenue generated from this tax will be allocated to recruit 6,500 new teachers. However, private schools have expressed strong opposition to the decision, warning that it could lead to an increase in the number of children transitioning to the state sector as parents struggle to afford the fees. According to the Independent Schools Council (ISC), there are currently 554,316 children enrolled in private schools in the UK, representing 5.9% of all pupils.
Julie Robinson, chief executive of the ISC, voiced concerns about the potential disruption to children’s education due to the new tax. ‘Thousands of children face having their education disrupted as a result of this unprecedented tax,’ she stated. ‘It will increase pressure on state schools and an already-stretched SEND system, as well as on faith provision, specialist arts education, and military families.’ Robinson also highlighted that the draft legislation was published without prior consultation with independent schools. ‘We believe the best way to improve education for all is for schools to collaborate, not to tax education,’ she added.
The ISC reports that annual fees for private day schools average £18,064, but the costs can rise substantially for elite boarding schools. For instance, Brighton College, the most expensive private school in the country, charges nearly £65,000 per year, meaning parents will face an additional VAT cost of £13,000. Under the new plans, local authorities that fund students with special educational needs to attend private schools will be reimbursed for the VAT cost.
Furthermore, starting April 2025, private schools will be required to pay full business rates, removing the 80% charitable rates relief they previously enjoyed. Education Secretary Bridget Phillipson has estimated that the combined taxes would generate £1.7 billion annually. In contrast, earlier research by HM Revenue & Customs under the previous Conservative government projected that the revenue would be approximately £650 million per year.
Public opinion seems to support the charge, with polling by YouGov indicating that 60% of voters are in favour of imposing VAT on private school fees, compared to 24% who oppose it. However, the decision has faced criticism from senior Conservative MPs. Shadow Home Secretary James Cleverly described the tax increase as ‘an ideological decision’ targeting ‘small independent schools,’ adding, ‘Don’t let them spin it as a necessity. It’s the politics of envy.’
Additionally, it is noteworthy that Sir Keir Starmer’s cabinet has the lowest proportion of privately educated ministers in decades. Only two of the 25 cabinet ministers attended independent schools for most of their education, equating to 8% of the cabinet compared with a national average of 6 to 7%. Reeves, who attended a state school in south London, has previously described her satisfaction in outperforming privately educated boys at chess tournaments during her school years. ‘There were two things I always wanted to prove: that a girl could be just as good as a boy, but also a girl from an ordinary background could be just as good as a boy from a more privileged background,’ she said last month.
The introduction of VAT on private school fees marks a significant change in the education sector’s financial landscape. While the government aims to generate revenue to fund new teachers, the move has been met with criticism and concern regarding its broader impact on education access and quality.
