Why has VAT been applied to private school fees?

The UK government has introduced a 20% value-added tax (VAT) on private school tuition fees, aiming to generate revenue for state schools across England. The policy, effective from 1 January 2025, is expected to raise £460 million in the 2024/25 financial year, increasing to £1.7 billion by 2029/30.

The extra funds are earmarked for hiring new teachers, repairing aging school buildings, and addressing delays in support for children with special educational needs and disabilities (SEND). Chancellor Rachel Reeves confirmed that all revenue from the VAT will go directly to state education.

What VAT means for private schools?

VAT is a government consumption tax added on top of goods and services. Previously, private schools were exempt from VAT due to their educational status. This exemption, along with charitable business rate relief for many schools, was removed, increasing the cost of tuition for families.

The Independent Schools Council (ISC), which represents over 1,400 private schools, reported that average fees rose 22.6% in January 2025 compared to the previous year. The council attributes the rise to a combination of the VAT, higher national insurance contributions, and the loss of business rate relief.

While elite schools such as Eton College and Harrow School charge around £50,000 per year, the average UK private school fee is closer to £15,000 annually.

Impact on students and families

The government predicts that around 35,000 students may shift from private to state schools over time, a number well within the capacity of the state system, as overall student numbers are expected to drop by 700,000 by 2030. However, some local schools may experience increased class sizes, and some parents argue the effect on low-fee faith schools and SEND students could be significant.

Certain children with SEND who require a private school to meet their needs but do not have a formal education, health, and care plan (EHCP) are still required to pay VAT. Similarly, grants for boarding fees for children of military families have been adjusted to reflect the new tax.

Legal challenges

The ISC, alongside a smaller group of Christian faith schools and parent advocacy group Education Not Discrimination, have challenged the VAT in court, arguing that it discriminates against low-fee faith schools and could impact children whose needs are unmet in state schools.

Government lawyers maintain that families wishing to avoid state-funded education have the option of private schooling or home education. Courts have yet to deliver a final resolution, but the VAT policy remains in effect.