Back to school
While students are back in school for the new term, the private schools are gearing up for January, when VAT on school fees comes into effect. In addition, those schools who have charity status will no longer benefit from business rate relief, meaning added drain on their income.
VAT will be applied to tuition fees and boarding fees, but not to books, nursery care, school meals, holiday clubs and part-time classes, even those run by third parties.
As the majority of schools will pass on the additional 20% to the parents – even Eton College plans to do this – the question for some parents will be ‘Can we still afford it?’
As private school fees range from around £15,000 to £50,000+ per annum that’s going to make a significant difference. Realistically, most families who are paying for schooling in the upper end of the price range can probably afford the increase, but for the more cash-strapped it’s not a case of having no options, just different options.
Parents who can no longer afford the current fees will not necessarily move their children into the state school system. Instead, there’s likely to be a domino effect as the financial squeeze pushes parents who are counting the pennies to look for a less expensive option. As families move down the fees ladder, there’s bound to be some drop off at the bottom end.
Some families have looked into their crystal balls and paid fees in advance, side-stepping the VAT increase for as long as they have prepaid. However, the cut-off date for prepaying fees and not being subject to VAT was 29th July – all fees paid for the January 2025 term after that date will attract VAT.
How will this affect the state school system?
The government have announced that the increased VAT income will fund 6,500 new teachers, so concerns about increased class sizes as pupils leave the private school system to attend a state school should be allayed by that.
There are 30 academies in the UK that offer boarding, and, currently, their boarding fees won’t be subject to VAT as it only applies to private schools.
When all is said and done, there are many excellent state schools with educational standards that are as good as, or better, than some private schools. Look at the house prices in an area – great state schools drive up house prices!
While Labour are planning to invest the school system, there are bound to be repercussions, but we don’t know what those might be yet.
