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

I think this thread has kept to the OPs question on communication with the school quite well. @Sneezeanddessist I've found it useful to know what's going on in other private schools.

Well I assumed you weren’t looking at schools that cost £40k+ otherwise you wouldn’t be dithering about the financials.

I have nothing against private schools. I went to one. My partner’s son goes to one (incidentally we pay may need to pay £3,600 rather than £3,000 per term of the VAT comes in.

What I have a problem with is people like you who can’t really afford it, and so claim that the policy is unfair because it makes private school unaffordable (or less affordable). If you can afford it, do it. If you can’t, find a decent state school.

Don’t flap about a policy designed to close yet another pretty outrageous tax loophole for the better off being unfair and you being “unable to understand how a government could do it” etc etc.

That’s why I’m “piping up”. It’s the epitome of spoilt to be whinging about a fair rebalancing of costs because it suddenly affects you.

I’m not going to bother replying to you. Good luck with the fees, I hope it works out for you, at the new and improved fairer rate. 👍🏻

Can you not see that It is just a bit off that the OP doesn't want anyone's views on anything other than fee increases but then goes on to give their own political views on it? That's not really how MN works.

If VAT is added, we’ve been advised to be prepare for a 21% increase. 16% VAT related, plus the yearly increase of 5%

You have literally no idea what I can and can’t afford, I said I need to take things into account. If I couldn’t afford it I wouldn’t be considering it. Nothing is certain for anybody and I’m sure most parents on here monitor their outgoings, I know many parents are worried about this increase in VAT (see numerous articles across the media).

As I said before this isn’t political, I created this thread to shed more light on the overall approach from schools going forward. That extra 20% added may be enough to dissuade some people completely and lots will have DC starting in the upcoming years.

I completely disagree that it’s spoilt to want to provide the best education for your child. And I feel incredibly sorry for your step-child if this is what you project onto him.

I was actually trying to shut it down if you read my earlier comments but won’t accept any personal attacks. As mentioned, this thread is intended to give a general overview of what private schools have said so far if anything and realistically what we should be preparing for. I hoped it would be useful for other parents too.

I can't help feeling that parents with enough spare cash to pay years of private school fees in advance in one go could probably afford to pay the VAT that is due on the luxury of private education.

We had an email today from the school my daughter will be starting in September. They've said basically still a lot of unknowns as to when it will start. Offered prepayment but warned it's possible that VAT will be backdated. No mention of a reduced amount (less than 20%) and to be honest I don't understand how they can change the 20% amount as VAT is supposed to be paid by the consumer. So many people saying schools are staggering the increase but I don't see how that will work, unless they decrease the baseline fee to make up for it I suppose.
Our school is low fees anyway so I don't expect them to do this and I have budgeted for the full 20% since we decided to send her there.

We have only chosen an independent school because we are relocating and all the state schools we visited are full, so the council can't allocate a place until we've moved and DD is going into year 10. I didn't want uncertainty around where she will end up and how she'll get there, plus the move is disruptive enough to her education so a compromise of a smaller school and more focused support will hopefully mitigate that to an extent. Never expected to be in a position to use private education and I don't have an issue with paying VAT on it (though I do hope it actually does go towards funding state schools!).

So many people saying schools are staggering the increase but I don't see how that will work, unless they decrease the baseline fee to make up for it I suppose.

Yes, this is how - the baseline fee (and hence the school's income) will go down,

“I can't help feeling that parents with enough spare cash to pay years of private school fees in advance in one go could probably afford to pay the VAT that is due on the luxury of private education.“

I am sure that is the case - but also for anyone who has bought a Ferrari or Rolls Royce in the last year? How about we retrospectively charge them another 10 per cent super luxury VAT on top of the usual 20 per cent?

Rich people do not get rich and stay rich for no reason. They are savvy financial planners. I really do not see how Labour will be able to retrospectively get to prepayment without putting the whole world off investing in the UK? Go for people retrospectively? It is a risky move.

That’s a very well raised point. Also I think worth remembering, a lot of schools especially those that are boarding have a huge amount of overseas pupils. Albeit I think they do pay higher fees.

“Presumably the local community pay to use the pool? Our local indie generously lends its facilities to the local community - at a pretty hefty charge.“

Well ours has already told the swim schools they may have to up the charges because they will be cutting costs in the private school. This is where I got the information from - the swim school is worried.

Like I said, the big schools are asking the parents where to cut costs - on local community service, bursaries, extra curricular, subject offerings, class sizes and they will then act accordingly. This is what the Labour Party has told them to do? Cut the base line cost - they have constantly been saying that private schools do not have to pass the full cost on and the only way not to is to offset VAT and cut underlying costs. The school local to me spends 2 million a year on the community! So we are all going to feel it - it is there in their accounts. That is why some state schools and local communities will be affected.

It's fine not to want a political thread. However, to say political views are not welcome but then give your own turns the thread into a bit of an odd echo chamber.

good point, I agree I should not have engaged. I do hope this can be a useful thread

As I have already contributed extensively (as has @Araminta1003 ) to the political threads on VAT, I will leave after this post.

But: her parallel with retrospectively applying VAT to a bentley is not a good one. If someone pays for a product and receives it, the transaction is compete and there is not a way to apply taxes afterwards if they were charged correctly at the time.

This is a different question to whether or not a service prepaid for many years is subject to VAT rules at the time of payment or VAT rules at the points of delivery.

The idea that such an approach (well flagged by Labour!) would impact international investor confidence is a nonsense. Investors are used to different political goals and tax regimes. What is not good is unexpected changes (step foward, Truss and Kwarteng)

And Araminta knows all this, from other threads.

We’ve been told to expect an increase of 13%, they’ve encouraged us to pay up front though.

We’ve also been advised to pay the fees through the company and have it deducted from wages. I don’t think we claim the VAT back but you don’t have to pay NI on the fees so will save a few thousand a year.

Wrong again. I pay approx £9k per year (50% scholarship) so my VAT, if implemented would be £1800 per year.

Food, uniform and school transport are the same as for the local state school so I'd have to pay those anyway. In ds' gcse years I spent £600 on a gcse German exchange one year and £500 on a geography field trip in the other.

Extra curricular were archery, swimming & chess (free) and gym - £40 for 10 sessions.

You don't get it, do you. Not all independents are like Eton or Harrow ! As a single mum, I've managed to get ds through but VAT would have pushed me in to debt. Luckily we'll be through (I think) before it happens. I'm glad I didn't have someone like you telling me I shouldn't try.

@SheilaFentiman - nobody knows what will happen with the prepayments - we just know that private schools have been encouraging them and it makes financial sense for them to do so, because they can raise extra tax free income via interest on them (at least those private schools that are charities). Interest that those parents may have otherwise paid tax on, usually at 40% or 45%.

Some schools may have now taken so much in prepayments pre election that they can use the interest earned from those to lower the VAT the pass on! Do the maths - a certain percentage of parents prepaying a number of years is not an irrelevant income stream.

In the future, if the point of supply is when the invoice is raised, what are the implications for prepayment for inheritance tax purposes? Grandparents and overseas parents (for currency stability reasons) have been doing this for years.

So if someone prepays in the future the VAT won’t be due until the invoice is issued years down the line?

Nobody knows what private schools will do to adapt - but rest assured, those that can will be run more like profitable businesses, because they have been encouraged to do so. For example, may team up with real estate developers to build on their land and rent it out at profit etc. - as long as they are allowed to do so under their constitution.

There is still a big question mark on how this VAT will be implemented, if it will. The simpliest understanding is 20% VAT on top of fees invoice to parents, and some schools have said so. But labour have also said the schools could "absorb" this VAT instead of passing it to parents, making a guess the schools may lower the fees to offset the overall bills. While with some of the VAT exemptions now known eg. ECHP, serving parents, it will become very confusing. Different fees for VAT or VAT-exempted children?

No prepayment at DS's school and we've been told to expect the full 20%. My school is saying nothing (except please lobby your MP) but is asking for prepayment and another local school has said it will absorb the increase short term.

… which is something else I don’t get. Labour have stated that they, on the whole, expect independent schools to find the money and absorb the cost of VAT for parents, by cutting back, in a new race to the bottom.

…but, isn’t this policy about raising funds for state schools?

so, if independent schools cut back, lower their fees and ‘absorb’ the costs, surely these lower fees now attract less VAT, raising much less money?

…whilst all at the same time, these charities now become more business minded, cutting back on community benefit projects and outreach, learning how to offset VAT too and maximise revenue. I.e. our independent school lets the two local primaries use the pool, twice a week, with instructors, for free - that will stop (cost for council). Our local indie, plus the local boys school lend mini buses to 2 local secondaries for the sport fixtures - that will stop (cost to council). Our school is already reviewing a decision to convert a huge disused residential building that was bought into a community hub with library, computers, science lab, etc. for local state nurseries and primaries - word on this street is that it will now become 4 flats!?!? And be rented out to supplement the bottom line.

This is all bonkers finance, unless I’ve missed something. The politics of the angry, jealous and shortsighted, I guess.

PS. In response to the OP - out school is going to do all the of the above to try and absorb some VAT for a short while.

In response to original question, our school have gone in an unusual direction by not allowing prepayment, and stating with some certainty that BAT is due at point of invoice, and as the full year’s fees are invoiced in July there will be no VAT payable this year, even when fees are paid in monthly instalments though the year.

Two boys at a Surrey Secondary Independent.

Although not explicitly stated, like others have suggested, we’re expecting an initial rise of 10-12% from September 2025.

Sadly, I think the main impact will be on bursaries, which will reduce significantly. The main way of mitigating impact is by having more children on full fees. Talented children with parents who can’t even contemplate paying fees will have to run the state lottery.

I don’t trust the conservatives with the NHS and I don’t trust labour with education.

So let’s add VAT to university fees then too.