Private school fees set to rise: what parents need to know about the new VAT

The VAT charges will apply to any fees paid after 29 July 2024 that cover tuition starting in January 2025 or later. Furthermore, private schools that currently benefit from charitable status will lose their 80% business rates relief from April 2025.

What could this mean for parents and fees?

While the change may sound straightforward, it doesn’t automatically mean that fees will increase by the full 20%. The government predicts an average rise of around 10%, as schools adapt to balance their budgets. However, parents should be prepared for variability, with some schools potentially raising fees more than others to cover additional tax liabilities.

For many families, this increase could reshape financial planning. With the current average cost of private school fees in the UK at approximately £15,000 annually—and considerably higher at top-tier schools—this policy could add substantial new expenses. The Independent Schools Council warns that some parents may already be reconsidering private education due to the prospective rise in fees.

Impact on state schools and pupil migration

A significant concern among parents and educators is the potential migration of students from private to state schools as a result of fee increases. The government estimates that around 35,000 pupils could move to state schools in the long term. However, officials cite data from the Institute for Fiscal Studies (IFS), suggesting that the state sector should be able to accommodate this influx, given that overall pupil numbers are expected to decrease by 700,000 by 2030.

While pupil numbers are not uniformly falling across the country, with variations in local demand, the government maintains that there are sufficient school places in most areas. As of last year, 83% of primary schools and 77% of secondary schools had at least one unfilled spot.

Special considerations for SEND students

For children with special educational needs and disabilities (SEND), the situation varies. If a child's placement at a private school is funded by a local authority through an Education, Health and Care Plan (EHCP), the VAT on fees can be reclaimed by the local authority. However, if parents independently choose private schooling for their child, the new VAT will apply, adding to their financial burden.

To mitigate some of these challenges, the government has emphasised its commitment to ensuring earlier and more effective intervention in mainstream schools to support students with less complex needs.

Military families and boarding school funding

The government recognises the sacrifices made by military families and aims to cushion the financial impact through the Continuity of Education Allowance (CEA). Both the Ministry of Defence (MoD) and the Foreign, Commonwealth and Development Office (FCDO) have confirmed that they will adjust the CEA to reflect the VAT-induced increase in fees, maintaining support for eligible families.

What happens next?

Parents and guardians should be proactive in understanding how these changes will affect them. Schools are expected to communicate their plans regarding fee adjustments and any potential changes to bursaries or scholarships. Meanwhile, HMRC is hosting webinars and offering guidance on VAT registration to support schools through this transition.

While the policy's impact on enrolment and fee structures remains to be fully seen, what is clear is that parents should prepare for financial adjustments in the coming years.

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