VAT on school fees could raise cost of private education to £667,900

• Analysis reveals cost of private day school from five to 18 is around £461,430, and for day school at five switching to boarding at 12 it rises to around £667,900 

• Outside of London, the most significant impacts are on school fees in Central and West of England and the South-East, presenting significant affordability issues for many families 

Parents sending a child to private school face paying up to £111,300 extra over each child’s whole school career as a result of VAT being introduced on school fees, according to an analysis* by Rathbones, one of the UK’s leading wealth management firms. 

Families whose children are privately educated who have chosen to go private are facing substantially higher costs than they would have done previously. The total cost of sending a child to a private day school from aged five to 18 is now as much as £461,431 on average in the UK, while the cost of starting at day school aged five and boarding at age 12 is £667,900 if the full 20% VAT is added, the data shows.

Rathbones estimates fees paid for a child starting private day school at age five in September this year and moving to a boarding school at age 12 until they are 18 will be £111,300 higher on average across the UK because of the introduction of VAT. The additional cost could be as much as £129,500 in London.

The total cost for a five-year-old starting at a private day school in September this year and leaving at 18 will be £76,900 higher on average across the UK, the data from Rathbones shows. In London, the cost could be nearly £95,700 more. The analysis takes into account annual fee rises of 4%, which has been the average annual increase since 2016*.

Rathbones’ wealth planners estimate the total £461,431 cost of sending a child to a private day school after the addition of 20% VAT from age 5 to 18 would equal 4 years and 3 months after tax income for a couple earning £150,000. The total cost of a day school and boarding school of £667,900 is equal to 6 years and 2 months of after-tax income for the same couple.

Faye Church, Senior Financial Planning Director at Rathbones said: “The impact on parents’ finances over a child’s school career of adding the full 20% VAT to fees is substantial and may mean some will decide they cannot afford the expense or need to consider other ways in which to manage the costs of the education for their family.

“However, it was already the case that funding a child through private school is a major commitment with the average total cost at around £380,000 for day schools and £556,000 for day and boarding schools before any VAT is applied to school fees. If there are several children, of course this will multiply, and we’re hearing from families who are very concerned and helping them plan for this.”

The Government announced the addition of 20% VAT on private school from the school term beginning in January 2025. Private schools will also have to pay full business rates from April 2025 having previously been eligible for charitable rates relief of 80%. 

The Government estimates** around 37,000 private school pupils will leave schools as a result of VAT on fees while the Independent Schools Council (ISC) says Government data shows 77 private schools have announced plans to shut since the policy was announced in October 2023***. The ISC warns many local authorities lack the capacity to absorb private school pupils transferring to the state sector.

Rathbones’ data shows parents in London face the biggest increases if VAT is passed on in full by schools - they will pay nearly £96,000 more at day schools from age five to 18 and £129,500 for day and boarding schools. The impact will be lowest in Northern Ireland at £30,800 for day schools and £60,800 for day and boarding schools.

Total costs are still daunting however – in Northern Ireland, the cost including VAT at 20% for day school from age five to 18 is £184,800 and for day at five and boarding at 12 it is £365,000. In London, attending a day school from five to 18 will cost around £574,000, and for day at five and then boarding school at 12, it rises to £777,200. 

The table shows the additional cost around the country for parents of pupils starting at age 5 and staying at school till age 18 if the full 20% VAT is passed on. All figures assume a 4% increase each year in fees.

-Ends-

Capital at risk. The value of investments and the income from them can go down as well as up and you may not get what you originally invested. Past performance is not a reliable indicator of future performance. The information contained in this release is based on our current understanding of HMRC tax regulations in the UK. Tax treatment depends on your individual circumstances and may be subject to change in the future. This information should not be taken as financial advice or recommendation. The registered address of Rathbones Group Plc is 30 Gresham Street, London EC2V 7QN.

Notes to Editors

•  *Based on Rathbones analysis of data from schoolfeeschecker.com. This included the latest fees for day and boarding schools, and an annual increase of 4%. According to schoolfeeschecker.com, school fees have been increasing by around 4% since 2016
• ** https://ifs.org.uk/sites/default/files/2023-07/IFS-Report-R263-Tax-private-school-fees-and-state-school-spending.pdf Private school fees — VAT measure - GOV.UK
• *** ISC CEO: VAT on fees policy 'a bridge too far' for some independent schools - ISC

For further information, please contact:

Rathbones

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Tessa Curtis

Director of Communications & Corporate Affairs

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07833 346238

Frances McNab

Press Office Senior Executive

Frances.McNab@rathbones.com

07585 981 924

Perception A

Phil Anderson               

phil@perceptiona.com

07767 491519