The introduction of VAT on private school fees

In the Autumn Budget, Chancellor Rachel Reeves confirmed the government’s plans to end tax breaks on private schools; as of 1 January 2025, the standard 20% VAT rate is applicable on private school fees. This much anticipated reform has sparked concern among parents that they may have to pull their children out of fee-paying schools, thus disrupting their education.

What does this change mean?

The introduction of VAT on private school fees represents a significant shift in the way education is taxed in the UK. Traditionally, private schools have been exempt from VAT; however, with the new legislation, termly bills are expected to increase. Any tuition fee payments made for the January 2025 term since 29 July 2024 are now subject to VAT. Additionally, from April 2025 private schools that are charities will no longer be entitled to charitable business rate relief, which provides an 80% discount on the cost of their premises.

Both these tax changes are likely to have caused private schools to increase their rates. However, it is worth nothing that the government were not expecting most fees to go up by 20% as schools do not have to reflect VAT increase in the amount they charge parents. Instead, it was predicted that fees would rise by about 10%.

Why has VAT been introduced?

The decision to introduce VAT on independent school fees is part of a broader move by the UK government to increase revenue and address fiscal challenges. While private schools have long been exempt from VAT, the government argued that these changes could help close the gap in public funding for education. By taxing private school fees, the government aims to generate additional income and improve opportunities for the nine out of 10 children who attend state schools.

The potential impact on families

Critics argue that the introduction of VAT on independent school fees could disproportionately impact families who rely on private education for their children. With rising school fees already putting a strain on household budgets, this new tax could make private education even less accessible for many families. However, the government noted that the number of pupils attending independent schools has remained broadly the same in recent years, despite fee increases due to inflation. It was therefore predicted that less than 0.5% of the private school population (35,000 students) will be moved to a state school. However, the long-lasting impact of this recent change still remains to be seen.

Affordable private schools in Hertfordshire and Essex

There are some excellent private schools in the local area that charge below the average rate and still provide an outstanding education for students. Holmwood House School in Colchester was recognised in 2021 as one of the country’s most affordable private schools. As of January 2025, fees start from £4,390.65 termly for reception pupils. The school recently extended its senior provision up to Year 11, so students can benefit from a wonderful education up to GCSE level for £6,448.46 per term.

In Hertfordshire, the King’s School, Harpenden gives its students the space they need to reach their full potential, thanks to small class sizes and excellent pastoral care. Fees start from just £3,154 per term for primary school students and from £3,850 for secondary. 

More education content

You can find articles like this one in our Private Wealth Guide, where we spotlight affordable independent schools in the local area. Or, follow us on social media, where we publish all our private wealth content using the hashtag #PrivateWealthGuide.