If you have children that attend a UK private school, the recent announcement around VAT on school fees is likely to be a major concern.

We’ve summarised the main points of the announcement and what they mean for school fees.

20% VAT on private school fees from 2025.

Bringing private schools within the VAT system is aimed at generating higher revenues for HM Revenue & Customs (HMRC) and providing more money to invest in state education.

There’s a debate to be had around whether charging VAT on school fees is a good or bad move. But the reality is that it’s happening and it’s best to be prepared.

Here are the main points to be aware of:

On 29 July 2024, the Chancellor of the Exchequer, Rachel Reeves, announced that all education services and vocational training supplied by a private school, or a connected person, for a charge will be subject to VAT at the standard rate of 20%.

Boarding services provided by a private school, or a connected person, will also be subject to VAT at 20%.

VAT on these fees will commence from 1 January 2025.

Any fees invoiced or paid on or after 29 July 2024 that relate to the school terms after 1 January 2025 will be subject to the standard rate of VAT at the beginning of that term.

School fees paid before 29 July 2024 will follow the VAT treatment in force at the time of the normal tax point for these supplies, where the fee rate for the relevant term has been set and was known at the time of payment.

Adding 20% to school fees is a significant additional cost and will mean you reevaluating your budget for schooling and considering the overall impact on your expenses.

If you’d like to talk to us about the VAT changes, we’d be happy to run you through the implications and to help you break down the impact on your spending.