The new Labour Government is proposing to apply VAT to independent school fees. Both independent schools and independent school parents are advised to start anticipating the change and plan for additional costs.

What does removing the VAT exemption from school fees mean in practice?
Currently, independent schools, and those schools registered as a charity, qualify as an ‘eligible body’ and are exempt from charging VAT for their services. This exemption also covers activities related to the provision of education, such as school trips, meals, and boarding. The proposed change will remove the definition of a ‘eligible body’ from independent schools so that all independent school students being educated in the UK would be charged fees at the 20% VAT rate.
Why is VAT being applied to school fees?
By levying VAT on school fees, it is predicted that around £1.6 billion additional tax revenue will be raised. The current plan is to spend this additional amount on recruiting 6,500 new teachers in key subjects to the state school system.
When will VAT be applied to school fees?
Applying VAT to independent school fees was mentioned in the recent King’s Speech at the State Opening of Parliament. It stated that the VAT exemption will be included in the post-election budget in the Autumn, with the measure passing into law in the next finance bill. We do not know whether the it will come into effect in April 2025, at the start of the next tax year, or in September 2025 at the start of the new academic year.
Will VAT charges apply to international students?
According to UK law, VAT is chargable if the education supplier is based in the UK. This means that VAT could also be charged on fees for international students looking to study in the UK.
Will VAT be charged on fees for children with an EHCP?
The Labour Government has previously confirmed that the changes will not affect children and young people with an Educational, Health, and Care Plan (EHCP).
How can schools mitigate the impact of increased costs for parents?
There are still many unknowns about the plan, however, it appears likely that VAT exemption will happen as this was a key part of the Labour manifesto and it was mentioned in the King’s Speech.
It may be possible for schools to mitigate some of the 20% VAT charge by claiming expenses, such as on purchasing text books, food, and other assets. This is still to be confirmed and we will not know more until the details of the plan are shared. Schools shoud be cautious about giving parents too much advice on potential mitigations.
It is important that both parents and schools monitor the situation and take expert advice as more detail is released by the government.
HB Accountants is here to help you
HB Accountants supports your both your business and personal finances, and will always share information that will help with growing your business, improving your personal life or mitigating changes to the tax system.
The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any error
Read Our Latest Blogs Below
- HB Accountants Podcast: Episode 3 Year End Tax Planning Tips for IndividualsFollowing the success of our previous episodes, HB Accountants is excited to announce Episode 3 of our podcast series: Year End Tax Planning Tips for Individuals. This installment is dedicated to helping individuals navigate the complexities of personal tax planning as the fisccal year draws to a close.
- HB Accountants Podcast: Episode 2 Smart Tax Planning Tips for BusinessesWelcome back to the HB Accountants Podcast. After the success of our first episode, we are excited to bring you Episode Two, where we tackle a crucial topic for every business owner – tax planning.
- Working From Home tax relief – you can still claim for the Covid-yearsDuring the lockdowns of 2020-2021, a number of people were asked to work from home. The Working From Home Rules on Tax Relief were relaxed to cover additional energy and other household costs encountered by working from home. The rules for working from home tax relief have evolved now that people are back to working … Continue reading
- National Minimum Wage – What counts as working time?A number of workers are not being paid the National Minimum Wage (NMW). Often, this isn’t intentional, it’s because the NMW is more than just a pay rate, it’s a calculation. The main reason why so many companies accidentally underpay their workers is because they do not know about the calculation. Here is the HB … Continue reading
- No further Tax Increases: Spring Statement 2025The UK Chancellor of the Exchequer, Rachel Reeves has delivered her second fiscal statement announcing her focus is on growth. In the run up to the event, the Chancellor stated that she ‘remains committed to one major fiscal event a year to give families and businesses stability and certainty on upcoming tax and spending changes … Continue reading