Private School Fees plus VAT

[ApplesOrangesBananas]

I am looking at schools for DC to start next year. I have read some articles that said parents were getting ahead of this rise by pre paying for numerous years in advance. Obviously we can’t do this yet because DC hasn’t started yet.

I’m curious has anybody who has children at private school been told what to expect yet? Will fees go up 20% or will they “half it” with parents and only go up 10% etc?

This increase is something we need to factor into account when exploring schools.

Also this is not a thread for you to bash private schools and write things such as “choose state school instead like the rest of us”... if those are your opinions then please find a different thread instead. I purely want to know if any parents have received communication regarding a fee increase yet? Thank you

The government hasn't given any details yet so private schools can't advise parents. Ours has said that it will offer fee advance payments and that it is working hard to mitigate the impact for parents.

In the same boat. I am hoping they give notice before rising fees. Realistically, we would know when VAT be implemented, so at that point best to contact school and ask for options. VAT wouldn’t kick in overnight.

Our school said to expect an initial increase of 12-15% and then higher than normal increases in following years. I think this is because they can claim back vat on historical capital investments, but obviously can’t do that forever.

You just factor in 20% extra from Jan 2025 fees.

If it's too much, then choose a different school. If the extra 20% is later than January, then every term is a bonus.

The paying in advance to avoid VAT loophole will be closed- Rachel Reeves has already said this.

Thanks for your reply. This is my biggest worry that there won’t be as higher increases to begin with but they will come later on.

I assume schools will be worried about their numbers so won’t want to do it all in one hit, however one school has told me that it has no choice but to pass it on.

My DC's school has said that they're expecting the VAT to come into place in Sep 2025.

Yes I think Rachel Reeves confirmed that it would be postponed until Sept 2025.

Our school have offered pre pay but said that it still could be subject to VAT.
They havent said what increase there will be if any but it is "hoped" that there will be no VAT on fees next academic year

I also read it was Sept 2025, as DC starts. At least I can make a choice before we venture down the private school route. I feel very sorry for those who are having to consider pulling their children out, it will be so disruptive for them. I can’t understand Labour’s reasoning behind it at all.

There is no "reasoning". It is a policy to appease the hard left who want to abolish Indy schools (Raynor etc).
It won't bring in even half of what they are saying, and that's before they apply the exemptions for: SEN, military, state boarding etc.
It is a petty, regressive and ideological attack with zero benefit to the state sector. It appeals to populist calls to "tax the rich".

By the way, the payment in advance to escape VAT is no guarantee that VAT won't be levied on what's been paid. Our school was very clear to emphasise this.

Ask the school how much profit it or its owners made and if this can be used to offset the increase .

www.hamhigh.co.uk/news/24428493.teachers-strike-devonshire-house-prep-school-hampstead/

Last year, Dukes Education reported a £230m million turnover and an operating profit of £34 million, the NEU said.

Our school is a charitable organisation- there is no profit.

I’m at the other end - ds just left, dd sixth form. I won’t therefore be paying VAT, but paid my dd’s fees up in advance anyway. She has an old scholarship from years ago so it’s worth a lot - unlike the modern ones which are 0-5%.

Our school wrote a letter saying that they had no details of the policy - basically in the dark completely, but were continuing to try to raise as much revenue as possible from other sources eg renting out sports facilities to local clubs/events in the evenings/weekends, using the school facilities for other events in the holidays etc, also selling off a house that used to be where a member of staff/their family lived. They have also said they have very limited ability to absorb any of the VAT. What they didn’t say, but it is obvious to me, is that they have already done quite a major cost cut over the last few years. I’ve bought exercise books, files and textbooks etc as they can’t risk textbooks getting lost so they aren’t allowed to leave the classroom. Staff cuts - deleting the smallest subjects, making big departments manage with one less teacher and one poor guy actually got his salary cut.

It’s also worth noting that this type of school has for many years faced demands from parents re accountability for what they spend as parents are finding it. They make sure to buy budget stuff/share stuff/go without stuff and there is hell to pay if parents are asked for additional contributions to stuff as they’ve already paid so much.

Bottom line - most schools have little to no capacity to absorb VAT and have already, for many years, been cost cutting. The situation is far removed from public perception and Labour are pretty much ignorant with no real life current experience in this sector.

Thank you, very well put. From looking around a couple of schools before labour even suggested VAT, those schools were struggling to fill their numbers and clearly had financial difficulties. Others relied on donations for new sports halls etc. My previous boarding school closed down because it wasn’t financially sustainable anymore, and sadly I imagine many more will face the same fate.

I think the increase will be around 15% on the tuition part of the fees only. I'm assuming there will be no vat on the boarding part. Some schools have already started splitting their fees on their websites into tuition and boarding elements.

Ours has said that it will offer fee advance payments and that it is working hard to mitigate the impact for parents.

I think that would be considered tax evasion rather than tax avoidance and therefore illegal.

There is no "reasoning". It is a policy to appease the hard left who want to abolish Indy schools (Raynor etc.

This. Once the policy is in place I wonder what Starmer will come up with next as sops to the hard left. A ban on private jets maybe - though that was his choice of transport to the Euros final.

Why do you think that?
It might well not be effective, depending on the way the proposal is implemented, but why would you think it is tax evasion?

Because you are paying up front for something you haven't yet received so that you don't have to pay tax.

The government will close this loophole because clearly parents would be paying in advance to try and avoid the VAT.

DH works in a private school and they will not even allow anyone to pay more than one year at a time or else they have to register that they are offering a financial service to parents and it's not worth the hassle.

Also, with many smaller schools in difficult financial positions why would you want to risk it as if they go bust you will not be a preferred creditor.

I have looked at one school that lets you pay up to 36 terms in advance! I personally wouldn’t pay more than a year or two upfront regardless of saving because you never know what may happen and it’s a large amount of money not to get back.

And in the real world, children are going to school with empty lunch boxes because their parents can’t afford to feed them.

As the original post writes… this is not a place to bash those who chose private school nor are we ignorant to what the rest of the UK suffers.

Find a different thread.

DH works in a private school and they will not even allow anyone to pay more than one year at a time or else they have to register that they are offering a financial service to parents and it's not worth the hassle.

Also this. And fees will go up year on year too, so the fees you've paid in advance won't be enough in several years' time either, so the extra you'd need to pay would be taxable. And what if the school folded, or you weren't happy with the service being provided, or you needed to withdraw your child, or, or, or......