Rachel Reeves‘ first Autumn Budget as Chancellor, revealed on October 30, pledged to go ahead with plans to levy VAT on private school fees from January, as well as scrapping their business rates relief from April. Both measures will see the extra cash generated funnelled into state education.
It’s a double blow for the sector, which was hoping that the Labour Party would renege on its election promise to slap the tax onto fees – or at least delay the plans, allowing for better financial planning.
Fee-paying schools in the UK are currently exempt from VAT, but from the New Year, they will have to pay an a 20% on the fees they charge.
And independent schools will no longer qualify for charitable status, meaning that from the Spring they will have to pay their business rates in full.
Stakeholders have blasted the Budget amid worries the changes will see a decline in interest from international students.
Suzanne Rowse, the director of the British Boarding Schools Network, called the plans “very disappointing”.
Despite schools “working hard to cut costs to reduce the costs on families”, she cautioned that the average rise in fees would be substantial, at an average of 10-15%.
“After all the evidence gathered and shared with the Treasury during the consultation period, illustrating the devastating impact this policy will have on children, families, and schools, we sincerely hoped they would scrap or at the very least delay the policy,” she told The PIE News.
Our network of student recruitment agents is already seeing a drop in enquiries from international families interested in British boarding schools
Suzanne Rowse, British Boarding Schools Network
And she warned that interest from overseas families is already on the wane due to Labour’s stance on adding VAT to independent school fees.
“Our network of student recruitment agents is already seeing a drop in enquiries from international families interested in British boarding schools and our September agent survey suggested that international recruitment could decline by 28% in September 2025,” she added.
It’s not just the boarding school sector that’s worried about the policy’s implications. Other independent schools are struggling to plan ahead for the changes amid what they consider inadequate advice from the government.
Speaking to The PIE ahead of the Budget announcement, Daniel Cohen, head of business development at MTM Consulting, said there was palpable confusion among schools.
“There’s a lot of panic in the sector at the moment – schools don’t really know what’s happening. The guidance from HRMC isn’t really fit for purpose,” he said.
He estimated that the market could contract by between 6.6% and 8.8% and encouraged schools to start making plans to counteract the effect of the policies.
“I’d definitely advise schools to be as transparent as possible. Understand the size of the market and what parents’ affordability is going to be. Have a plan based on what parents want and need.”
