VAT on Private Schools: What You Need to Know

With Labour now in charge and their recent budget announcement detailing changes to private school fees, both parents and private schools need to understand the impact of these VAT changes. Here, we’ll break down the important details, including steps you can take to prepare.

What is a Private School?

Private schools, also known as independent schools, are educational institutions that charge tuition fees rather than relying on government funding. They often receive additional support from donations, investments, or endowments, which helps provide benefits such as smaller class sizes, specialised programs, or a unique curriculum.

Are Private Schools Charities?

Yes, around half of private schools in the UK are registered charities. Charitable status offers certain benefits, such as relief on business rates, helping to reduce costs and keep fees relatively lower for families. This means that private education has been more accessible for some families who may not otherwise afford it.

Current VAT Treatment

Until now, private school fees have been exempt from VAT, as these schools are considered “eligible bodies” under UK VAT law. This exemption means they don’t add VAT to their fees, keeping private education costs lower compared to services that must apply the tax.

Is VAT Legal?

Yes, VAT (Value Added Tax) is a legal tax applied to many goods and services across the UK. Education has historically been VAT-exempt because it’s seen as a public benefit that helps society as a whole. However, with Labour’s recent budget announcement, this exemption will be removed, and private school fees will become subject to VAT.

Labour’s New VAT Policy on Private Schools

In their recent budget announced on 30 October 2024, Labour confirmed that the VAT exemption for private school fees will be removed. From 1 January 2025, private school fees will include VAT at 20%. This will significantly raise the overall cost of private education, and families need to prepare for these changes.

When Will VAT on Private Schools Begin?

Labour’s announcement sets the start date for the VAT charges on private school fees to be 1 January 2025. Private schools are already making plans to help parents prepare for this transition. Some schools may offer advance payment options so that parents can secure VAT-free rates before the new policy takes effect.

Arguments For and Against Adding VAT to Private School Fees

Labour’s decision to apply VAT to private school fees has led to significant debate, with both supporting and opposing viewpoints.

Arguments For Adding VAT

– Fairer Funding: Proponents argue that applying VAT is fair since private education primarily serves wealthier families. Labour plans to use the funds to support state education, benefitting the majority of students.

– Supporting State Schools: Labour estimates that VAT on private school fees could generate over £1 billion per year for state schools, helping to close the funding gap between state and private education.

Arguments Against Adding VAT

– Higher Costs for Families: Critics argue that adding 20% VAT will increase costs significantly, making private education unaffordable for some families who currently manage to pay for it.

– Impact on State Education: Some worry that increased costs could lead to closures of smaller private schools, pushing more students into the state sector, which could lead to larger class sizes and resource strain in state schools.

FAQs About VAT on Private Schools

What is VAT, and why does it matter to private schools?

VAT is a tax on goods and services. With Labour’s recent budget, private school fees will be subject to 20% VAT starting 1 January 2025, raising costs for many families who pay for private education.

Will boarding and other related services be affected by VAT?

It’s not yet clear if related services, such as boarding, transport, or school trips, will also become subject to VAT. Parents are advised to stay informed as more information is released.

Are all private school fees now subject to VAT?

Yes, from 1 January 2025, most private school fees will include VAT. However, Labour plans to maintain the VAT exemption for students with an EHCP (Education, Health, and Care Plan).

What should parents do now?

Parents should consider discussing advance payment options with schools to secure VAT-free rates before 1 January 2025. Many schools are offering upfront payment schemes for families to avoid paying the extra VAT.

FAQs About Maths Concierge

Who is Maths Concierge?

Maths Concierge is an educational service specialising in high-quality tuition and resources for students from 11+ through to A Level. We cover both Maths and English, helping students build the skills they need to excel.

How can Maths Concierge help with understanding VAT changes?

At Maths Concierge, we’re committed to supporting families through educational changes, including understanding how VAT on private school fees may impact finances. We offer guidance to help parents make informed choices about their child’s education.

What subjects and levels does Maths Concierge cover?

Maths Concierge offers tuition and resources in both Maths and English, from the 11+ exam to A Level. Our aim is to help students of all ages build confidence and excel in these core subjects.