Private school fees across the United Kingdom will be subject to a 20% Value Added Tax (VAT) beginning January 1, 2025. This change, announced by the government, will affect all payments made for the January term after July 29, 2024. The removal of the VAT exemption is part of a broader initiative to generate additional revenue, with each nation within the UK determining how to allocate these funds.
The Labour Party has repeatedly emphasized its intention to utilize the additional funds to employ 6,500 new teachers for state schools in England. The government projects that this policy will generate an extra £460 million in the fiscal year 2024/25, with expectations of this figure rising to £1.7 billion by 2029/30. Despite these plans, the Treasury has refrained from commenting on any potential litigation that might arise from this decision.
The Independent Schools Council (ISC) has expressed concerns regarding the government's projections, suggesting that the level of pupil displacement has been underestimated. The ISC anticipates that approximately 37,000 students may transition from private to state schools over time due to this policy change. This potential shift could significantly impact state school resources and infrastructure.
Currently, there are approximately 2,500 private schools in the UK, educating about 7% of all pupils, which includes around 570,000 students in England alone. These institutions have already experienced significant cost increases, with average fees rising by 55% since 2003. With the introduction of the standard VAT rate of 20%, the government expects private school fees to further increase by around 10% on average.
This anticipated fee hike comes amidst reports from some private schools of a 4.6% decline in Year 7 pupils as of September 2024. Furthermore, only students with a local authority education, health, and care plan (EHCP) that specifically names their school will continue to be exempt from VAT. This limitation could further exacerbate the financial burden on many families already grappling with rising education costs.
The government maintains that the revenue generated from this policy will be reinvested into the education system, with a particular focus on increasing the number of teachers within state schools in England. Meanwhile, as each UK nation decides on their specific spending plans for these additional funds, stakeholders await clarification on how these changes will ultimately impact both private and public education sectors.
