Private schools and VAT – the latest
Why VAT on school fees?
Like everything else we purchase, the price of private school education is always increasing. Over recent decades, school fees have risen between two and six per cent each year. Salaries tend also to grow each year thanks to the forces of inflation and as long as household incomes keep pace with the increases in school fees, private education will continue to be affordable for many. However, as with lots of services and products we buy, education has always been ‘VAT exempt’, meaning that the tax could not be charged on school fees. Because the Labour Party believes that private education is a luxury, it has now imposed a tax of an additional 20 per cent (the standard rate of VAT) onto school fee invoices. The government has stated that the change would raise £1.8bn a year by 2030 and that this money will be invested in state schools and teacher recruitment.
Separate legislation was also introduced in England in April 2025 to remove business rates relief for private schools that are charities (around half of them). Business rates are a tax on non-domestic property payable by all organisations. Charities pay business rates at the reduced rate of 20 per cent but the Government has now ended this relief for charitable private schools. Private schools which are not charities already pay full business rates. In Scotland, the same change affecting schools and business rates took place in 2022.
Have fees increased 20 per cent?
VAT at 20 per cent must, by law, appear on the invoices schools send out. However, many schools have attempted to reduce their costs so that fee-payers do not feel the full effect of the additional 20 per cent.
Once schools’ tax status changed to make them VAT-eligible, they also became able to reclaim the VAT they are charged when purchasing goods and services. This includes money spent on capital investments in building projects – something they could not do under the previous tax arrangements. The Institute of Fiscal Studies, whose report formed the basis of Labour’s policy, estimated that this deduction means that the bottom line on invoices sent to parents by private schools should show something closer to a 15 per cent rather than 20 per cent increase. And cost cutting elsewhere to further reduce what is passed on to parents may be possible although schools tell us that additional outgoings in the shape of business rates, national insurance and pension contributions make for limited options.
In May 2025, the Independent Schools Council (ISC), which monitors its members’ fees, reported that average fees had risen by 23 per cent between January 2024 and January 2025. This jump can be attributed to the normal annual rise of fees at the start of the academic year as well as additional increase resulting from VAT in January 2025.
Legal challenges
Starting 1 April 2025, and running for three days, a judicial review of the government’s school fees VAT policy took place at the High Court in London. The challenges came from schools, pupils and parents, and were supported by the ISC. Among them were families with children who have special educational needs as well as parents who wish for their children to receive a particular type of religious education not available in the state sector. These groups claimed that thanks to VAT on school fees they were no longer able to access the education they want for their children and that it therefore constitutes an infringement on their human right to education.
However, on 13 June 2025, the three High Court judges dismissed their challenge stating that the policy was ‘made by Parliament, in primary legislation, after full debate and was a manifesto commitment’.
Individuals and organisations involved in the judicial review have said that are now planning to appeal against the judgment. The ISC has said it is carefully considering its next steps.
Are parents paying 20 per cent more?
The total on invoices to parents is fees plus the new VAT at 20 per cent. However, most schools have cut their outgoings and therefore reduce their fees, resulting in the final figure being an increase less than 20 per cent. This is an issue that each school has had to address on its own terms. We know of some schools that have absorbed a significant part of the increase in this way through reducing staff, activities and bursarial support, but there are other schools whose paper-thin margins mean the increase has left them in an evermore precarious situation.
How are schools managing with VAT?
There are schools which have endeavoured to find a middle ground between absorbing the value of the VAT and passing on the full extent to parents. The GDST which operates 25 girls’ schools across England and Wales has increased the total costs to parents by 12 per cent. The King’s School Worcester (and schools in its group) has kept costs the same as pre-VAT for the whole ‘24/‘25 academic year and said that for the ‘25/‘26 academic year the fee increase will be capped at 10 per cent. Giggleswick in North Yorkshire has absorbed all the additional costs while Eton College has made no concessions and passed on the additional cost of VAT to parents. However, the school has said it will bolster support for pupils on bursaries and those who may now need bursaries to continue at the school.
Eton College has made no concessions and passed on the additional cost of VAT to parents.
Can I pay school fees upfront?
If you have the financial reserves to do so, you should ask your school if this is an option. Paying multiple terms’ fees upfront will still include VAT but may come with a small discount.
Are schools offering any financial help to parents?
No school wants to see a child forced to find a new school. However, this may be the reality for families who are unable to pay fees after the introduction of VAT. Parents with genuine concerns should speak to their school. There may be ways to spread costs or bursaries and hardship funds might be made available.
School closures
The new tax arrangements have left many schools feeling uneasy about their future and, since the change became inevitable, a steady stream of schools have signaled their plans to close. It is impossible to know how these schools may have fared without the added financial strains but, in many cases, VAT has clearly been a key factor in the decision. Such closures include highly-regarded and much-loved institutions and there will inevitably be disruption to the education of thousands of children. The cloud’s silver lining is that those families who continue in private education and seek places elsewhere will help shore up the finances of their new school which may too have been feeling VAT-related pressures.
There are also increasing numbers of school mergers and collaborations going ahead. These objective of these is to pool resources, staff and facilities in order to save money. In some cases this has been a larger school taking on a smaller school without major disruption to either's day to day existence but there are also planned mergers where the site of one school will close and be sold off. Some mergers are also resulting in redundancies.
Who is exempt from paying VAT?
Fees charged by the country’s 32 state boarding schools, where education is paid for by the state and parents only pay the boarding fee, continue to be exempt from VAT. There is no such exemption for boarding fees charged by private boarding schools. There is also an exemption in place for charges related to before/after-school care, provided it is not educational.
British military and diplomatic families who use the Government’s Continuity of Education Allowance (CEA) to enable their children to attend UK boarding schools have seen a funding increase which covers some of the new added costs.
Similarly, children who have their places at private schools paid for by the music and dance scheme will have the added cost of VAT covered by the state-run fund.
Are children with SEND exempt?
Where local authorities pay for children with an EHCP to attend a private school, the local authority will be refunded the additional cost of VAT on fees by the DfE but otherwise, no. No other child with SEND who is receiving a private school education will be exempt from the new VAT charges.
Moving my child to a state school?
If you anticipate moving school at a normal point of entry (entering reception, year 7, year 12 at the start of the academic year in September) you can take part in the main round of admissions and your child will be subject to the same process as every other child applying. However, if you are going to apply to a state school at any other time or entering any other year group you will need to complete your Local Authority’s in-year admissions process. In-year applications work differently as you need to apply directly to the admissions authority. If the school is run by the LA (eg a community or voluntary controlled school) then your LA is the admissions authority. However, if you are applying to an academy, foundation, or voluntary aided school (most faith schools fit into these categories), these schools are their own admissions authority and so you must deal directly with them for admissions.
The Government has stated that dropping birthrates should free up a lot of school places; hundreds of thousands in the next five years. However, while the national, and even regional, numbers make it appear as though the state sector can absorb both the short-term impact of pupils leaving private schools and the longer-term effects of families choosing not to go private, the more localised numbers paint a different picture.
Despite research published in the Financial Times that shows the majority of local authorities may have space in state schools, there are also many which will struggle to provide places for even a handful of children coming from the private sector. The situation in each local authority is different – a concentration of the worst affected seems to be in London and the South East – but you should be able to find details of place availability online or your LA will provide details on request. And remember even if you know a school doesn’t have any places available, there is nothing to stop you from applying to the school and attempting to get a place through the appeals process.
What if we don’t like the state school we’re given?
Local authorities have a statutory duty to provide a state school place for every child who applies for one. Once it has offered you a place, its statutory duty is done. Unfortunately, there is no requirement for the school you’re offered to be one you would choose or easy to get to. In areas with a shortage of state school places, those with availability are likely to be the ones with poorer levels of academic performance.
There is no requirement for the school you’re offered to be one you would choose or be easy to get to.
There is also a possibility that the school place you are offered is a considerable distance from home. Statutory guidance (guidance, not law) says that the maximum length of journey a child should be given is 45 minutes at primary school and 75 minutes at secondary school. Local authorities interpret this in different ways although it’s worth mentioning that journeys of more than two miles (for children under 8) and three miles (for children 8 and over) will qualify you for free school transport.
Appealing the decision
You can appeal to any school that has rejected your application. You can also ask to be put on the waiting list. If you have been rejected from schools close to home but the local authority has found you a place at a school some distance away, you may choose to appeal to the schools that rejected you, arguing that they would be a better option given the long journey your child would otherwise face. Read our article to understand more about school appeals. If you are not offered a school you like, our advice is to keep an open mind and try to find the good in it. Set aside reputation, pay it a visit and make your own mind up. If you really have no choice but to take the place, consider using some of your newly disposable income to supplement with tutoring and extra-curricular clubs outside of school to give your child the rounded education you were hoping for.
Alternatives to the state sector
If fee increases leave you with no choice but to take your child out of their school, it may be that a different private school in your area is still affordable. There are never guarantees about the availability of places and you might find yourself on a waiting list but if you’re determined to avoid whatever state school is made available to you, then this might be an option for you. If you have to bide your time waiting for place to become available at a state or private school or if you simply now want an alternative to mainstream schooling, then home schooling, online or hybrid schooling may be worth looking into.
How can we help?
The Good Schools Guide Education Consultants help hundreds of parents every year find the best schools for their children. With a wide range of experience across state, private, and special education, our experts are available to advise and troubleshoot all your educational dilemmas.
