He said loud and clear that a Labour government would impose VAT on private school fees straight after winning the election, and he isn’t messing about. That policy comes into force from January, and now the Express has obtained exclusive research showing just how much it’s going to cost affected families.
Analysis by finance company Premium Credit shows it will add more than £100,000 to the cost of educating child privately.
Additional fees will add up to £107,000 over their school career if they board, or £74,000 for day schools.
There are regional variations with parents in London paying an extra £124,500 at private boarding schools and £92,000 more at day schools.
This is based on analysis by finance company Premium Credit for a child starting their private education at five and leaving at 18.
While the super wealthy will be able to soak up the cost, middle class and working class families working flat out to give their children a good start in life will lose out.
St Joseph’s Preparatory School, in Stoke-on-Trent, is the latest to shut down. It will close on December 31, one day before the Government’s 20% levy on school fees begins.
That takes total closures to nine and the number will surely rise. One in seven pupils are expected to leave the private sector, because parents can’t afford to pay more.
Their children will fall back into the state system, further squeezing resources.
Premium Credit’s figures assume that schools pass on the full standard rate 20% VAT charge to parents from January 1, 2025. That’s on top of annual inflation fee increases of 4%.
In practice the total increase may be marginally lower. Like all VAT-registered businesses, private schools will be able to reclaim the VAT they pay on goods and services.
Premium Credit’s research suggests that many schools will aim to limit increases to around 15% as a result.
Schools say they will cut back on recruitment and staff pay rises to limit fee increases, as well as scrap infrastructure projects and cut spending on equipment.
However, private schools will also have to pay full business rates from April 2025 having previously been eligible for charitable rates relief of 80%
Stewart Ward, head of school fee plan at Premium Credit, said the VAT hike will have a substantial impact over a child’s school career. “Some will decide they cannot afford the expense or consider other ways to manage education costs.”
He said funding a child through private school is already a major financial commitment. Even before the VAT hike, sending a child to day school from five to 18 cost £370,000 on average, or £535,000 for boarders.
Premium Credit’s School Fee Plan (SFP) provides funding to help families spread the cost of their children’s school fees.
Ward said growing numbers are using these plans, which break the cost into 12 monthly instalments, rather than paying a lump sum at the start of each term. “Plans split the cost into regular monthly direct debits, like any other household bill.”
Hopes that parents could use “fees in advance” schemes to pay multiple years of private education fees in one go to beat Labour’s raid have been dashed. All payments for terms starting from January will be subject to VAT.
Labour says that ending the tax break is likely to raise £1.5 billion which it plans to invest in state schools and recruiting more than 6,500 new teachers.
