VAT on private school fees – what parents need to know

The government has confirmed that VAT at the standard rate of 20% will be applied to private school fees from 1 January 2025. This represents a significant change for parents and schools alike, as fees that were previously exempt from VAT will now see a substantial increase.

While the change takes effect in the new year, any fees paid in advance from 29 July 2024 relating to terms starting after January 2025 will also be subject to VAT under 'anti-forestalling' rules.

What is covered by the VAT charge?

The 20% VAT charge will apply to all tuition fees and boarding fees for private schools. However, certain extra-curricular activities, wrap-around care (such as before and after-school clubs), and school meals may remain exempt if they are closely related to welfare rather than education. The exact treatment of these additional services will depend on how they are structured and billed by the school.

Impact on parents

For many parents, this change will require a reassessment of their household finances. A 20% increase in fees is a substantial additional burden. Parents should review their payment plans and consider discussing options with their school, as some institutions may choose to absorb a portion of the VAT cost by reducing their underlying fees, though this will vary widely.

Anti-forestalling measures

To prevent parents from avoiding the tax by paying years in advance, the government introduced anti-forestalling rules. Any fees paid on or after 29 July 2024 for terms starting in January 2025 or later will be subject to VAT. Parents who paid fees in advance before this date may escape the charge, provided the payment met the strict criteria for a true advance payment rather than a simple deposit.