The government will press ahead with plans to introduce VAT on school fees in private schools despite opposition from some parents and head teachers.
The Finance Bill brings into law measures set out by Chancellor Rachel Reeves in her first Budget, including the removal of an exemption which means independent schools do not currently have to charge 20 per cent VAT on their tuition.
The standard explains what the law will mean for schools and parents.
What will the law mean and when will it come into effect?
From January 1, a VAT rate of 20 percent will be added to all independent school fees.
Simply put, this means that fees will increase for parents whose children attend private school.
The policy was a key promise in Labour’s manifesto, with Sir Keir Starmer saying the funding would be used to recruit 6,500 new teachers to state schools.
How will the extra money be used?
Downing Street said money raised from the tax raid would allow Labor to invest in state schools.
No 10 said earlier this week that private school fees were “obviously out of reach for most people”, which made it “right to put money into state schools”.
The policy aims to raise £1.5bn in 2025, rising to £1.8bn by 2029.
Labor says this will fund the recruitment of 6,500 new teachers.
How did Labor justify the change?
Education Minister Bridget Phillipson said last week that middle-class families were in favor of the tax.
She told the Sunday Times that parents were “largely priced out” of sending their children to private school, which is why “there is such support for our policy to end the tax breaks that private schools enjoy for investing in state education”.
Ms Phillipson added that the average cost of private tuitions had risen to £18,000 a year.
“Middle-class parents in good professional jobs with housing costs simply can’t afford that level of fees and want brilliant state schools,” she said.
What impact will the policy have?
It is possible that this policy could force many parents to withdraw their children from private school, according to experts.
Analysis by wealth management firm Saltus found that more than 80,000 children could be withdrawn from private schools after Christmas.
Mike Stimpson, partner at the firm, told Moneyweek: “Our data suggests that the addition of VAT next month will affect more than half of parents with children at private school, with 13 per cent of children potentially moving schools between now and the summer . ”
Eton College, England’s most famous boarding school, said tuition fees were likely to rise from £52,749 to £63,000.
Who opposed the tax raid?
Shadow finance minister James Wild said VAT on private schools would “damage the education of thousands of students”.
Liberal Democrat education spokeswoman Munira Wilson said the changes would penalize children with special needs who do not have a formal education health and healthcare plan (EHCP).
Many private schools also reacted violently to the changes.
Dr Julie Robinson, chief executive of the Council of Independent Schools, said: “The majority of our schools are far from the government-promoted stereotype of independent education.
“The typical independent school is a small day school that does not have the resources to cut its budget by a fifth to absorb this unprecedented tax.
“Families who choose these schools come from a variety of backgrounds, including middle-class incomes.”
