UK confirms that value-added tax will now apply to private school fees

UK Chancellor Rachel Reeves announced on 29 July 2024 that the government will eliminate a value-added tax (VAT) exemption for private school fees and boarding services. The UK VAT is a goods and services sales tax that applies to most consumer purchases in the country, with the standard rate set at 20%.

While private school services had previously been exempt from the VAT, Chancellor Reeves has confirmed that the tax will now be applied to private K-12 school fees as of 1 January 2025 – at which point "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%". The same tax provision will now apply to all boarding services as well. Further, all school fees paid on or after 29 July 2024 for school terms beginning 1 January 2025 or after will now be subject to the tax.

The change had been tipped in the Labour Party manifesto leading up the July 2024 general election in the UK, and the sector has been pushing back on the idea for months, especially as it became clear last month that the new UK government would introduce the VAT changes months earlier than first expected.

Speaking late in July, Independent Schools Council (ISC) Chief Executive Julie Robinson said, "Any parent or school following the debate over VAT is likely to have been planning for September 2025…Families will have made choices about education months before an election was called; they cannot adequately plan for their children’s futures based on speculation, uncertainty and constantly shifting dates."

As it became clear that the new VAT policy would come into effect for January 2025, rather than September 2025, Ms Robinson added, “The change also means the policy would take effect one academic year earlier and parents would have missed the opportunity to apply for a state school place in the normal cycle."

“Any parent who might now need to move their child faces the prospect of an in-year admission, which is more difficult to arrange and will be detrimental to their child’s education."

After the VAT rule change was confirmed on 29 July, ISC's Head of Media and Communications Sarah Cunnane commented that, "We have significant concerns about what this policy will mean for our schools and how many will close. School closures are inevitable, sadly, and ultimately that is going to affect the families who’ve chosen to use them and is going to disrupt thousands of children’s education."

In October 2023, the UK Boarding Schools' Association published the results of a survey of Chinese parents. The 2023 edition of the the BSA's annual parent survey collected responses from 1,000 parents of current or prospective students. And it found that the addition of VAT to school fees would impact the decision making of 60% of the responding parents, with 9% saying that the VAT would cause them to choose another country for their student's education.

For additional background, please see:

• "International school openings, enrolments, and revenues continue to expand"
• "International enrolment in Canadian K-12 recovered to more than 80% of pre-pandemic levels in 2022/23"
• "British independent K-12 schools expanding overseas campuses"