Last week’s UK General Election resulted in a landslide result for the Labour Party, winning 411 seats out of a possible 650. The result made Labour’s Sir Keir Starmer the new UK Prime Minister. In their manifesto, Labour pledged to raise money for public services by introducing Value Added Tax (VAT) on fees for private schools, which are currently VAT exempt. With the estimated £1.6bn raised, the new government plan to hire new teachers, create new nurseries, provide mental health support in schools and implement other initiatives for public services including education. But what could the removal of VAT exemption for private schools mean for those relocating to the UK?
What does this mean for private schools and the families that use them?
The average yearly fee for private schools in the UK is around £15,000, although some notable schools charge up to around £50,000. Removing the VAT exemption from private schools means that it is very likely that fees will increase to include at least some of the tax that will now be paid on them. The current VAT rate sits at 20%.
Any increase in fees as a result of this change will be down to the school. Many private schools have pre-empted the change and committed to, where possible, minimising the financial impact on families by not passing on the full 20% increase. Some schools have suggested that, as a short-term solution, they may allow families to pay fees in advance before any changes come into effect – although there is a possibility that tax will be backdated to work around such attempts at tax avoidance. Regardless of individual schools’ efforts, it is very likely that families with children attending private school will see an increase in fees, possibly between 5 and 15%.
It is important to note that state schools will remain free to attend. Furthermore, children with education health care plans (EHCPs) who currently attend fee-paying schools due to shortages in state schools will remain exempt from VAT.
When will the change come into effect?
Labour have indicated that the change will be made as soon as it is feasible. Theoretically, they could pass a law at any time. As this matter relates directly to taxation, the House of Commons would have “financial privilege”. This means that, as long as certain conditions are met, the House of Lords would have no ability to challenge it. This would streamline the process and allow the government to implement the change sooner. However, there has as of yet been no announcement about when the change will come into force.
If you are relocating to the UK and looking at schooling options for your children, the Icon DSP team would be happy to discuss the changes with you. We can ensure you remain up-to-date and help you make the best informed choices for your children’s education. Contact us to find out how we can help.
Update 31/07/2025
The Government has since announced that the change will be come into effect on 1st January 2025. The tax applies to all payments for the January term onwards made on or after 29th July, meaning that attempts to pay in advance to avoid tax will not be possible.
