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Private schools: When and why is VAT being added to fees? Why was VAT added to private school fees and what difference has it made?
(about 1 month later)
VAT is now being added to private school fees after new rules came into force on 1 January. Average private school fees were 22% higher in January 2025 than in January 2024, according to the Independent Schools Council (ISC), which represents most independent schools in the UK.
The government plans to spend the money raised on more teachers for state schools in England. The government introduced VAT on school fees in January to pay for more state school teachers in England.
But a legal challenge to the policy has been taken to the High Court, with some families and schools claiming it is discriminatory and in breach of human rights laws. But the ISC and a number of families have taken the government to the High Court over claims the policy is discriminatory and breaches human rights laws.
What is VAT and when was it added to private school fees?What is VAT and when was it added to private school fees?
Value added tax (VAT) is one of the government's main sources of income. It is payable on top of the purchase price of many goods or services and the standard rate is 20%. Value added tax (VAT) is one of the government's main sources of income. It is payable on top of the purchase price of many goods and services. The standard rate of VAT is 20%.
Previously, private schools did not have to charge VAT on their fees because of an exemption for organisations providing education. Previously, private schools did not have to charge VAT on their fees because of an exemption for organisations providing education. That exemption was removed on 1 January.
Private school fees are liable for 20% VAT from 1 January. About half of England's private schools are charities, which means that they also received an 80% reduction on business rates (taxes on properties used for commercial purposes).
About half of England's private schools are also charities, so receive an 80% reduction on business rates (taxes on properties used for commercial purposes). The government removed that tax relief in April, but dropped earlier plans to scrap private schools' charitable status entirely.
Separate legislation will be introduced to remove this tax relief, but plans to remove private schools' charitable status have been dropped. How will the government spend the extra VAT raised?
Why was the VAT policy challenged in court?
The legal challenge was brought by three groups: the Independent Schools Council (ISC), which represents more than 1,400 private schools, a smaller group of Christian faith schools, and the parent-led group Education not Discrimination.
They argued that the policy goes against the legal right to an education.
They also claim the policy is discriminatory, as those families attending low-paying faith schools, or with children with special educational needs and disabilities (Send) who do not have an education, health and care plan (EHCP), say their needs "cannot be adequately met in the state sector".
But the government said the main objective of the VAT policy is to raise additional tax revenue so they can raise standards for the 94% of children who attend state schools.
Their lawyers argued that those who wish to opt out of "the system of universally accessible, state-funded education" are free to choose any private education for their child that they can afford, or to educate their child at home.
If the legal challenge is successful, the government could consider whether it would amend the policy, but it would be under no obligation to do so.
How will the extra money be spent?
The removal of the VAT exemption is UK-wide, but each nation will decide how to spend the additional money received.The removal of the VAT exemption is UK-wide, but each nation will decide how to spend the additional money received.
The government estimates that the policy will raise an extra £460m in 2024/25, rising to £1.7bn by 2029/30. The government estimates that the policy will raise an extra £460m in the 2024/25 financial year, rising to £1.7bn by 2029/30.
Chancellor Rachel Reeves said "every single penny" will go to state schools. Chancellor Rachel Reeves said "every single penny" will go to state schools - including funding the recruitment of 6,500 new teachers in England.
Labour has repeatedly pledged to use the money to recruit 6,500 new teachers for state schools in England. Schools have been struggling to attract and retain qualified teachers for many years, especially in subject areas like maths and science.
Schools have been struggling to attract and retain qualified teachers for years, especially in subject areas like maths and science. The government also said there will be funding to address other issues in schools, such as crumbling buildings and delays in the system for children with special educational needs and disabilities (Send).
In October's Budget, the government allocated different sources of funding to address other issues in schools, like crumbling buildings and a stretched system for pupils with special educational needs.
How much do private schools cost?How much do private schools cost?
Private schools - sometimes called independent schools - charge fees for most students.Private schools - sometimes called independent schools - charge fees for most students.
While some famous schools, like Eton and Harrow, charge about £50,000 a year, the average is about £15,000.While some famous schools, like Eton and Harrow, charge about £50,000 a year, the average is about £15,000.
There are about 2,500 private schools in the UK, educating about 7% of all pupils, including about 570,000 in England.There are about 2,500 private schools in the UK, educating about 7% of all pupils, including about 570,000 in England.
Private schools have more freedom than government-funded state schools, and do not have to follow the national curriculum.Private schools have more freedom than government-funded state schools, and do not have to follow the national curriculum.
Some local authorities pay for children with special educational needs and disabilities (Send) to attend private schools.Some local authorities pay for children with special educational needs and disabilities (Send) to attend private schools.
Those that have a local authority education, health and care plan (EHCP) which names a specific private school that can meet their needs do not have to pay VAT.
The government also said a grant to help cover the boarding school fees for children of military families was increased to take account of the VAT increase.
Do 'many' private schools cost the same as a family holiday?Do 'many' private schools cost the same as a family holiday?
Will private school fees go up for everyone? Have private school fees gone up?
Applying VAT does not necessarily mean fees will go up by 20%. Some private schools may decide to put up their fees more than others. The ISC represents more than 1,400 private schools. It said its annual census showed average school fees were 22.6% higher in January 2025 than they had been in January 2024.
On average, the government expects fees to increase by around 10%. It blamed the "triple whammy" of higher national insurance contributions, an end to charitable business rates relief and the introduction of VAT.
The average cost of private school fees has risen by 55% since 2003, even without VAT, the Institute for Fiscal Studies (IFS) think tanks says. The government had previously said it expected fees to rise by an average of around 10%.
However, the proportion of children being privately educated over the period has not fallen. In response to the ISC figures, a Treasury spokesperson said the increase was "not only down to VAT", and that private school fees had risen significantly in recent decades.
Children with Send that have a local authority EHCP, which names the specific school that can meet their needs, are exempt from the VAT policy. According to the the Institute for Fiscal Studies (IFS) think tank, average fees rose by 55% (after inflation) between 2003 and 2023.
The government says a grant to help cover boarding school fees for children of military families has also been increased to take account of rising charges. However, the proportion of children being privately educated over the period did not fall.
What could the tax change mean for state schools? Will the VAT changes mean the number of private pupils will fall?
The government does not expect a significant impact on the number of pupils attending private schools. When it announced the VAT increase, the government said it did not expect there to be a significant impact on the number of pupils attending private schools.
It estimates that around 37,000 students will move to the state sector over the long term, but believes class sizes will not increase. According to a Treasury memo seen by the BBC, initial estimates suggested that 54,000 pupils would be displaced, with most moving to state schools within the first two years.
It points to research by the IFS which says it would be possible for the state sector to "easily accommodate extra pupils" because overall student numbers are set to fall by 700,000 by 2030. However, the government now predicts that around 35,000 students will move to the state sector over a longer time period, and that class sizes will not increase.
It points to research by the IFS which said that state system could "easily accommodate extra pupils" because overall student numbers are set to fall by 700,000 by 2030.
That drop is larger than the total number of children currently attending private schools.That drop is larger than the total number of children currently attending private schools.
However, pupil numbers are not falling by the same amount everywhere, so some individual state schools could face pressure on class sizes.However, pupil numbers are not falling by the same amount everywhere, so some individual state schools could face pressure on class sizes.
The ISC says some of its members reported a 4.6% fall in Year 7 pupils in September 2024. The ISC says some of its members reported a 4.6% fall in the number of Year 7 pupils starting school in September 2024.
It believes the government has underestimated the level of pupil displacement that will be caused.It believes the government has underestimated the level of pupil displacement that will be caused.
Why was the VAT policy challenged in court?
The legal challenge was brought by the ISC, a smaller group of Christian faith schools, and parent-led group Education not Discrimination.
They argue that the policy goes against the legal right to an education, and claim it is discriminatory because it affects families attending low-paying faith schools.
The group also cites the effect on children with Send. Those who attend private school because their needs "cannot be adequately met in the state sector" but who do not have an EHCP have to pay VAT.
The court was told that the government had considered introducing the policy in September 2025, rather than in January.
But it rejected this idea because the main objective of the VAT change was to raise additional tax revenue to support the 94% of children who attend state schools, and any delay would have undermined that.
Government lawyers argued that families who wished to opt out of "the system of universally accessible, state-funded education" were free to send their children to private school or to educate them at home.
If the legal challenge is successful, the government could consider amending the policy, but would be under no obligation to do so.