Parents with children in private schools may need to start paying VAT on their fees as early as January, significantly sooner than initially expected.
Chancellor Rachel Reeves had appeared to hint during the general election campaign that Labour’s plan to impose a 20 per cent VAT on private school fees would come into effect in September 2025.
She told the Times CEO Summit in London that the tax would not be “retrospective” and stated it would be included in her first fiscal statement in the autumn, with many then anticipating that the tax would commence with the start of the next school year.
However, i understands that VAT could begin being applied to private school fees as soon as January, meaning parents paying by term could see their fees spike at the start of next year.
Ms Reeves defended the policy when speaking in London last month, insisting that “the children who are struggling most are in state schools – young people are not getting the chance to fulfill their potential.”
She also dismissed concerns that the change would mean private schools would be able to offer fewer bursaries to pupils from less affluent backgrounds, claiming that similar warnings were made in 1997 when Labour abolished the subsidised “assisted places” scheme but that bursaries subsequently increased.
The Chancellor added that “private schools will be able to make efficiencies” to accommodate the additional cost of paying VAT amid fears passing the cost onto parents could force thousands of children into the state sector.
Education Secretary Bridget Phillipson has also previously asserted that private schools could adjust their budgets to absorb the cost of Labour’s proposed tax increase.
In a recent interview with the Daily Mail, she pointed out that state schools have faced “some pretty tough choices in recent years” and suggested that independent schools could take a similar approach.
Ms Phillipson also confirmed that there would be no exemption for private schools catering to those with special educational needs and disabilities, despite facing criticism for the approach.
However, pupils with education health care plans (EHCPs) – a legally-binding document produced by local authorities setting out the care needs of a child – who are in fee-paying schools because of a shortage of provision in the state sector would be exempt from the VAT increase.
The controversial policy is expected to raise around £1.6bn a year which the Government intends to use to fund the hiring of 6,500 additional teachers.
But Institute for Fiscal Studies (IFS) has previously estimated that the actual figure will be between £1.3bn and £1.5bn once the impact of children switching to state schools is taken into account.
