VAT and Private Schools in the UK… What the new Labour Government has Proposed so far.

22 Jul

Updated 19/08/2024

Families planning a move to to the UK will be eager to learn about arranging schooling for their children. While most opt for state schools, a significant number of families we work with may consider the private school sector.

With our previous blog VAT and Private School Fees in the UK — EDUCATUS we discussed what we knew so far about the possible changes to VAT on private school fees in the case of a new Labour Government.

Labour has since come to power and the new government has outlined their educational reforms throughout the King's Speech at the state opening of Parliament. It was highlighted that ‘Measures will be brought forward to remove the exemption of VAT to Private school fees, which will enable the funding of six and half thousand new teachers.’

As of recent details published by the treasury, it seems as though the addition of the 20% VAT will be added to private school fees from January 2025. Link to the Government document Here.

Starting in January 2025, this also means that international students studying in the UK will be subject to VAT, as they are receiving educational services within the country.

We understand this news is disappointing and may cause concern for some of the parents we work with. Despite these challenges, schools within the Private sector are doing everything possible to minimise the impact of this legislation.

Understanding the Labour Government's Proposal

The introduction of a 20% VAT on private school fees will apply to both day and boarding fees, with nursery fees likely excluded due to coverage under the free entitlement to early education and childcare. The estimated revenue from this policy is around £1.6 billion per year, which the government plans to reinvest in public services, including education.

Key aspects of Labour's broader education policy include:

Free breakfast clubs in every state primary school.
Increased teacher numbers.
Enhanced support for mental health.
A new inspection regime for schools.

These initiatives aim to support children's educational achievements and well-being across the board, making education more accessible. Understandably though the policy has sparked debate about its potential impact on private schools, the families who use them, and the broader educational landscape.

How Schools May Plan to Manage the Change

It's important to highlight that the Government, in the technical note accompanying the legislation, has made it clear that "it will be a commercial decision for individual schools on how to fund the additional cost." They suggest that schools might consider several options, such as dipping into their surpluses or reserves, cutting non-essential expenses, or raising fees.

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

"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:

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.
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.
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.

What Can Fee Payers do to Prepare?

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: Research different schools and their policies regarding fee increases. Some schools may have more robust plans to mitigate the impact of the VAT.

Other Changes in Education

The Labour government unveiled a series of other major reforms in the King’s Speech at the state opening of Parliament. Key changes include limiting branded school uniform items to reduce costs, requiring all schools to follow a national curriculum, enhancing child protection, integrating multi-academy trusts into the inspection system and ensuring new teachers achieve Qualified Teacher Status (QTS). Additional measures include reinstating the School Support Staff Negotiating Body and creating a national register for children not in school.

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 make the best educational choices for your children.

Please note that new information from the Government is constantly being released, we will do our best to get the latest on the VAT increase as and when new information is available.

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.

After taking some time off the road to have her own little one, Katy-Rose redirected her focus to freelance photography and creative work, eventually finding her way to joining Educatus. Her perfect blend of creativity and extensive experience in schooling and relocation across various countries means she is the perfect creative to join our team.