The UK government’s changes to VAT on private school fees represent a significant financial shift for families choosing independent education. With the planned removal of the VAT exemption, parents must prepare for the increased costs and understand how these changes may affect their financial planning, legal obligations, and children’s education.
At Buckles, we understand the legal and financial complexities that come with these changes and are committed to helping families navigate them effectively. Beyond the financial implications, parents involved in legal proceedings concerning school fees, whether as part of divorce settlements or Schedule 1 Children Act claims, should consider how these changes might impact their legal responsibilities.
Understanding the VAT changes
Until recently, private school fees were exempt from VAT, meaning parents did not have to pay the additional 20% VAT on tuition costs. However, in 2024, the government announced its intention to remove this exemption. As of 1st January 2025, private school fees are subject to VAT unless specific exemptions apply. This change is part of a broader policy aimed at raising additional tax revenue and addressing perceived inequalities between state-funded and independent education.
The removal of the VAT exemption means that parents can expect a direct increase in the amount they pay for their children’s education. For example, a school currently charging £15,000 per year in tuition fees may increase these costs to £18,000 or more if the VAT is passed on without any mitigation measures. Families will need to account for this additional expense when planning for their children’s education.
Financial implications for families
The financial burden on families will depend largely on how schools choose to handle the new VAT requirements. Many independent schools are expected to pass the 20% VAT directly to parents, significantly increasing annual tuition fees. For a household already managing substantial education costs, this increase could present a significant strain.
For instance, if a family currently pays £20,000 a year in school fees, they could see those fees rise to £24,000 under the new VAT regime. This added expense may force some parents to reconsider their choice of private education, potentially leading to difficult financial decisions or alternative educational pathways.
Certain areas of school expenses, such as educational residential trips or extracurricular activities directly related to the curriculum, may still qualify for exemptions or reduced VAT rates. However, understanding which costs are exempt and how schools apply these exemptions will require careful attention to the information provided by each institution.
For separated parents, these changes could have legal implications, particularly where school fees were agreed as part of a financial settlement or child maintenance agreement. Parents currently contributing to school fees through a School Fees Order, which forms part of a financial remedy order in divorce proceedings, may need to review these arrangements. If a parent is responsible for covering tuition fees, the increase due to VAT may necessitate legal variations to reflect the additional financial burden. The welfare of the child(ren) will always be the first consideration.
Some parents may need to consider whether the increase in fees mean that they are no longer able to send their child(ren) to private school and instead may need to send them to a non-paying state school. If there is a dispute over which school a child should attend, this can ultimately be resolved through court proceedings by way of either a Prohibited Steps Order or a Specific Issue Order. It is always best to take expert legal advice on such matters and Buckles experienced family team can guide you in the right direction and consider how to resolve any such issues out of court first of all.
Claims under Schedule 1 of the Children Act 1989 are considered in circumstances where financial provision is required in order to ensure a child’s needs are sufficiently met. Claims can be made for periodical payments and lump sums amongst other things. This may assist a parent to meet the cost of school fees. Given the complex nature of such claims it is essential to obtain legal advice early on to consider the merits of making such a claim.
What families should do next
Parents should engage with their children’s schools to understand how these VAT changes will be implemented and what it means for their fees. Open and transparent communication is essential to anticipate financial impacts and plan accordingly. Many schools are expected to communicate any fee increases well in advance, allowing parents to adjust their budgets.
It may also be beneficial for families to consult with legal and financial advisors to explore options for managing the increased cost, such as investigating whether any tax-efficient savings plans, charitable contributions, or other financial approaches could help offset the increase. This will be particularly pertinent if school fees are covered under a divorce settlement, School Fees Order, or Schedule 1 claim, as they may need to apply for a variation order to reflect increased costs.
Be mindful that some schools operating under charitable structures or offering certain bursaries may be able to mitigate the VAT impact to some extent. Understanding these nuances could help families reduce the overall financial burden.
Planning for the future
At Buckles, our legal and tax specialists are here to support families through these changes. We are committed to providing clear, practical advice to help parents navigate their obligations, plan effectively, and continue to invest in their children’s education.
Families who take proactive steps today will be better equipped to manage the financial challenges posed by the new VAT regime and ensure they can continue to access high-quality independent education for their children.
