VAT and Private School Fees in the UK

11 Jun

Families considering a move to the UK are usually keen to understand how to arrange schooling for their children. The majority choose state schools but a sizeable minority look to the private school sector. With the possibility of a Labour government coming into power in the coming election (July 4th, 2024) there has been significant discussion about their policy of introducing VAT on private school fees. The current rate is 20% so understandably, this has raised concerns among current and prospective fee-paying parents about the potential impact on their financial planning and educational choices.

Understanding the Labour Government's Proposal

The change would include both day and boarding fees, while nursery fees would likely be excluded as they are generally covered by the free entitlement to early education and childcare.

According to some official estimates, the estimated revenue from this policy is around £1.6 billion per year, which a future Labour government intends to use for public services, including education.

Labour's broader education policy includes measures such as free breakfast clubs in every state primary school, increased teacher numbers, more support for mental health, and a new inspection regime for schools. These initiatives are designed to support children's educational achievements and well-being across the board.

Understandably the policy has sparked debate about its potential impact on private schools, the families who use them, and the broader educational landscape.

How Schools Plan to Manage the Change

Many private schools have been proactive in addressing these concerns. They are committed to minimising the financial impact on families and ensuring a smooth transition if the VAT is introduced. As an example, ACS International Schools has communicated the following reassurance to parents:

"In the event of a Labour government winning at the next election and the introduction of VAT on school fees at some point soon after, ACS is letting parents know informally that we will not pass on the full 20%. The actual VAT fee increase can’t be set until we know the details of Labour’s VAT change, but it will not be the full 20% and could be considerably lower. As soon as we have definite information, we will promptly inform parents. ACS is well resourced and is fully engaged in understanding Labour’s VAT proposals and engaging with other industry bodies and other private schools. Should any current parents want any further detailed technical conversations they are welcome to contact the Finance team for a chat."

Like ACS International School, there are several ways that we can expect Private Schools across the UK to support their families if the VAT increase comes to pass:

1. Partial Absorption of Costs: Some schools may commit to not passing on the full 20% VAT to parents. This means that the actual increase in fees could be significantly lower than 20%, alleviating some financial pressure on families.

2. Proactive Engagement: Schools will be actively involved in understanding the potential policy changes and engaging with other schools and industry bodies. This proactive stance ensures they are well-prepared to manage any changes efficiently.

3. Transparent Communication: As soon as definitive information is available, Private schools across the UK will promptly inform parents. This transparency helps parents plan and make informed decisions.

4. Paying in Advance : There may be ways to minimise the VAT payments such as paying fees in advance before the change comes into effect. This would be a short-term solution however and there is no official advice on this as yet. Additionally, there is the possibility that the tax might be be backdated to cover advance payments aimed at Tax Avoidance. This is something currently being discussed by tax professionals around this point.

What This Means for Fee Payers

For families considering private education in the UK, it’s important to stay informed and engage with the schools directly to understand how they plan to handle potential changes. Here are a few steps you can take:

Stay Updated: Keep in regular contact with the admissions and finance teams of prospective schools. They will provide the latest information and how it might affect fees.
Financial Planning: Discuss potential scenarios with financial advisors to ensure you are prepared for any changes in school fees.
Explore Options: Researching different schools and their policies regarding fee increases. Some schools may have more robust plans to mitigate the impact of the VAT.

Talk To Us!

If you are relocating to the UK the prospect of VAT being added to private school fees may seem daunting, but many schools are taking steps to minimise the impact on families.

Educatus consultants are experts in private education and our network of contacts means that we can continually engage with private schools and update our advice accordingly.

If you are considering using the private sector our experience can help you to make the best educational choices for your children.

Katy Cummings

Introducing Katy-Rose Cummings, the latest addition to the Educatus team. In her role as Marketing and Communications Manager, Katy-Rose is a force of ideas and creativity when it comes to spreading the word about our company and providing valuable information to our clients.

Katy-Rose's unique background makes her a perfect fit for our team. Growing up and experiencing schooling all over the world, including the Middle East and Africa, she knows first-hand what it's like to relocate frequently, settle into new schools, and she remembers well the headaches and conundrums her parents had when arriving in a new location worrying about the various school offerings. Having caught the bug for travel, Katy-Rose initially embarked on a creative career as a touring music photographer and content creator, capturing life on the road for numerous bands, in a world where social media presence is everything. After some incredible stints on the road including tours across Europe, the US and Australia, she then progressed on to the role of Creative Director at a London record label, overseeing all things creative and focusing more intently on marketing.

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