Labour’s private school tax change explained: Everything parents need to know

The Government will press ahead with plans to introduce VAT on private school fees despite a backlash from some parents and headteachers.

The Finance Bill brings into law measures laid out by Chancellor Rachel Reeves in her first budget, including ending the exemption which means independent schools currently do not have to charge 20 per cent VAT on their fees.

The Standard explains what the law will mean for schools and parents.

What will the law mean and when does it come into effect?

From January 1, all independent school fees will have the 20 per cent VAT rate added on.

In simple, this means that fees for parents whose children are attending private school will go up.

The policy was a key pledge in the Labour manifesto, and Sir Keir Starmer has said that the funds will be used to recruit 6,500 new state school teachers.

How will the extra money be used?

Downing Street has said the money recouped from the tax raid will allow Labour to invest in state schools.

No10 said earlier this week that private school fees were “clearly out of reach for most people”, which is why “it’s right to invest money in state schools”.

The policy aims to raise £1.5 billion in 2025, rising to £1.8 billion by 2029.

Labour say this will fund the recruitment of 6,500 new teachers.

How have Labour justified the change?

Education Secretary Bridget Phillipson said last week that middle class families are in favour of the tax raid.

She told the Sunday Times that parents had “largely been priced out” of sending their children to private school, which is “why there is such support for our policy of ending the tax breaks that private schools enjoy to invest in state education”.

Ms Phillipson added that the average cost of private school fees has risen to £18,000 per year.

“Middle class parents in good professional jobs with housing costs just can’t afford that level of fee and they want brilliant state schools,” she said.

What impact will the policy have?

It is possible that the policy may force many parents to pull their children out of private school, according to experts.

Analysis by wealth management firm Saltus has found that more than 80,000 children could be pulled out of private school after Christmas.

Mike Stimpson, partner at the firm, told Moneyweek: “Our data suggest that the addition of VAT next month will impact more than half of parents with children at private school, with 13 per cent of children potentially moving schools between now and the summer.”

Eton College, the most famous boarding school in England, has said that fees will likely be raised from £52,749 to £63,000.

Who has opposed the tax raid?

Shadow Treasury minister James Wild said VAT on private schools would “damage the education of thousands of pupils”.

Liberal Democrat education spokesperson Munira Wilson has said the changes will penalise special needs children who do not have a formal education health and care plan (EHCP).

Many private schools have also reacted furiously to the changes.

Dr Julie Robinson, chief executive of The Independent Schools Council, said: “The majority of our schools are far removed from the stereotype of independent education propagated by the Government.

“A typical independent school is a small day school that does not have the means to cut their budget by a fifth to absorb this unprecedented tax.

“The families who choose these schools come from a variety of backgrounds, including middle-class incomes.”

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