The government has announced that VAT will be applied to private school fees from 1 January and parents will not be able to avoid the tax by paying in advance.
The new fee will apply immediately to all fees for the school term starting in January 2025, preventing parents from avoiding the additional cost by paying up front. This move comes after the popularity of pre-payment schemes increased dramatically as private schools anticipated a Labor government.
To fill this gap, ministers have introduced anti-forestry legislation, covering all taxes paid from 29 July to the 30 October budget.
Chancellor Rachel Reeves said the revenue generated by this tax will be used to fund 6,500 new teachers. However, private schools have criticized the decision, warning it could lead to more children moving to the state sector as parents struggle to afford the fees.
According to the Independent Schools Council (ISC), there are 554,316 children enrolled in private schools in the UK, representing 5.9% of all pupils.
“Thousands of children are at risk of having their education disrupted by this unprecedented tax,” said Julie Robinson, chief executive of the ISC. “It will increase pressure on state schools and an already weakened SEND system, as well as on religious provision, specialist arts education and military families.”
“The bill was published before consultation with independent schools. We will work to engage the government on the consequences of this policy on schools, families and communities. We believe the best way to improve education for all is for schools to collaborate, not by taxing education.”
According to the ISC, annual fees for private day schools average £18,064, but can increase significantly for elite boarding schools. Brighton College, the most expensive private school in the country, costs almost £65,000 a year, meaning parents will face an additional VAT cost of £13,000.
Under Reeves’ plans, local authorities who fund students with special educational needs to attend private schools will be reimbursed for the cost of VAT.
The Chancellor also announced that private schools would have to pay full business rates from April 2025. Previously, independent schools were eligible for 80% relief on charity rates.
Education Minister Bridget Phillipson said the combined taxes would raise £1.7 billion a year, even though research by HM Revenue & Customs under the previous Conservative government estimated they would only raise £650 million a year. year.
A YouGov poll shows that 60% of voters support imposing VAT on private school fees, compared to 24% who oppose.
However, senior Conservative MPs have criticized the tax rise. Shadow Home Secretary James Cleverly said on Twitter/X that it was “an ideological decision” targeting “small independent schools”. He added: “Don’t let them pass it off as a necessity. It is the politics of envy.”
Notably, Sir Keir Starmer’s cabinet has the lowest proportion of privately educated ministers for decades. Only two of the 25 cabinet ministers attended independent schools for the majority of their education, accounting for 8% of the cabinet compared to a national average of 6-7%.
Reeves, who attended a state school in south London, has previously described his satisfaction in beating privately educated boys in chess tournaments during his school years.
“There were two things I always wanted to show: that a girl can be just as good as a boy, but also a girl from a normal background can be just as good as a boy from a more privileged background,” she said last month.