UK Private Schools Now Add VAT to Fees: The UK government has introduced a fresh wave of value-added tax (VAT) on the already expensive school fees for private educational institutions. This new rule, which came into effect on 1 January 2025, will add a 20% VAT on private school fees, marking a significant change in how these schools charge.
Why the change?
Previously, private schools were exempt from VAT on school fees, as education was considered a tax-exempt service.However, under the new regulations, VAT will now apply to all payments made for the January 2025 term onward. The government has stated that the additional tax revenue will be used to fund the recruitment of more teachers for state schools in England, addressing long-standing issues with teacher shortages, reports the BBC.
How will private school fees change?
VAT, which is a standard 20% tax levied on goods and services, has led to concerns that private schools will increase their fees even further. The average cost of private school fees, which currently stands at around £15,000, has already increased by 55% since 2003, according to the Institute for Fiscal Studies (IFS). Some prestigious schools, such as Eton and Harrow, charge as much as £50,000 a year. While the VAT is expected to increase fees by around 10%, the actual price hike will vary from school to school, with some potentially raising their fees more than others.
Potential consequences for private schools
Private schools, which educate around 7% of the UK’s students, have already reported a decline in the number of pupils attending, particularly in secondary education. The Independent Schools Council (ISC) highlighted a 4.6% drop in Year 7 pupils in September 2024, and it has warned that the VAT changes may result in further pupil displacement.
The government expects that around 37,000 students may transition from private to state schools in the long term. However, it believes the state sector can easily accommodate these students due to a projected decline in overall student numbers, with a reduction of 700,000 students by 2030. This anticipated drop is larger than the total number of children currently attending private schools.
Legal challenges and future outlook
According to the BBC, the ISC has indicated plans for a legal challenge against the policy, arguing that the tax changes could violate the European Convention on Human Rights, citing discrimination and the right to education. Despite this, the government has committed to using the funds raised to address challenges in state schools, such as improving teacher recruitment and dealing with issues like crumbling school buildings and special educational needs.
