Why is VAT being added to private school fees?
getty imagesAfter the new rules came into effect on January 1, VAT is now being added to the fees of private schools.
The government plans to spend the money raised on more teachers in public schools in England.
Private schools say they have already seen a decline in the number of secondary school students due to high fees.
What is VAT and when was it added to private school fees?
Value Added Tax (VAT) One of the main sources of income of the government. This is payable on top of the purchase price of many goods or services and the standard rate is 20%.
Previously, private schools did not have to charge VAT on their fees due to exemptions granted to education providing organisations.
From January 1, 20% VAT will be levied on private school fees.
The government had earlier said that the tax will be applicable on all payments made for the January period after July 29, 2024.
Almost half of the private schools in England are also charities, so get an 80% reduction on business rates (taxes on properties used for commercial purposes).
A separate law will be introduced to remove this tax relief from April 2025, but Plan to remove charitable status of private schools has been dropped,
How will the extra money be spent?
The removal of the VAT exemption is UK-wide, but each nation will decide how to spend the extra money received.
The government estimates the policy will raise an additional £460m in 2024/25, rising to £1.7bn by 2029/30.
Chancellor Rachel Reeves said “every penny” would go to the state’s schools.
labor has vowed again and again This money will be used to recruit 6,500 new teachers in government schools in England.
Schools have struggled for years to attract and retain qualified teachers, especially in subject areas such as math and science.
In October budgetThe government allocated various sources of funding to address other issues in schools, such as crumbling buildings and an extended system for pupils with special educational needs.
How much do private schools cost?
Private schools – sometimes called independent schools – charge fees for most students.
While some famous schools like Eton and Harrow charge around £50,000 per year, the average is around £15,000.
There are about 2,500 private schools in the UK, educating about 7% of all pupils, including about 570,000 in England.
Private schools have more freedom than government-funded state schools, and are not required to follow the national curriculum.
Some local authorities pay for children with special educational needs and disabilities (SEND) to attend private schools.
Will private school fees increase for all?
The introduction of VAT does not mean that fees will increase by 20%. Some private schools may decide to increase their fees more than others.
The government expects fees to increase by about 10%.
The Institute for Fiscal Studies (IFS) think tank says the average cost of private school fees has increased by 55% since 2003, even without VAT.
However, the proportion of children being privately educated has not declined during this period.
Campaigners had argued that VAT should not be added to fees for small religious schools, international schools or families with children with special educational needs.
But only those with a local authority education, health and care plan (EHCP), which names a specific school, will continue to get the discount.
The government says grants are being increased to help cover boarding-school fees for children of military families in response to rising fees.
What could the tax changes mean for state schools?
The government does not expect any significant impact on the number of students studying in private schools.
It estimates that about 37,000 students will move to the state sector in the long term, but believes that class sizes will not increase.
It points to research from the IFS which says it will be possible for the state sector to “easily accommodate additional pupils” as total student numbers are set to fall by 700,000 by 2030.
This decline is more than the total number of children currently studying in private schools.
However, pupil numbers are not falling by the same amount everywhere, so some individual state schools may face pressure on class sizes.
The Independent Schools Council (ISC), which represents more than 1,400 private schools, says some of its members have seen a 4.6% decline in Year 7 pupils in September 2024,
ISC believes that the Government has underestimated the level of student displacement.
In October 2024 the organization said It will move ahead with plans for a legal challenge against the policyIt argues that the tax changes violate the European Convention on Human Rights on two counts: the prohibition of discrimination, and the right to education.
Treasury said it would not comment on potential litigation.
