Getty ImagesVAT is now being added to private school fees after new rules came into effect from January 1.
The government plans to spend the money raised on more teachers for public schools in England.
Private schools say they have already seen a drop in the number of secondary school students due to higher fees.
What is VAT and when was it added to private school fees?
Value Added Tax (VAT) It is one of the main sources of government revenue. It is payable on top of the purchase price of many goods or services and the standard rate is 20%.
Earlier, private schools did not have to charge VAT on their fees as there was an exemption for education providing organisations.
Private school fees are liable to 20% VAT from 1st January.
The government had earlier said that the tax would apply to all payments made after July 29, 2024 for the January period.
Almost half of private schools in England are also charities, so get an 80% reduction on business rates (tax on properties used for commercial purposes).
Separate legislation will be introduced to end this tax relief from April 2025. The plan to end the charitable status of private schools has been shelved..
How will the extra money be spent?
The end of the VAT exemption is UK-wide, but each country will decide how to spend the extra money received.
The government estimates the policy will raise an extra £460m in 2024/25, rising to £1.7bn by 2029/30.
Chancellor Rachel Reeves said “every penny” would go to state schools.
Labor has. Promised again and again Using the money to hire 6,500 new teachers for public schools in England.
Schools have struggled for years to attract and retain qualified teachers, particularly in subject areas such as math and science.
i October budgetthe government allocated various sources of funding to address other issues in schools, e.g Collapsing buildings and a comprehensive system for students with special educational needs.
How much do private schools cost?
Private schools – sometimes called independent schools – charge fees to most students.
While some popular schools, such as Eton and Harrow, charge around £50,000 a year, the average is £15,000.
There are around 2,500 private schools in the UK, which educate around 7% of pupils, including around 570,000 in England.
Private schools have more freedom than publicly funded public schools, and are not required to follow the national curriculum.
Some local authorities pay (SEND) for children with special educational needs and disabilities to attend private schools.
Will private school fees go up for everyone?
Implementation of VAT does not mean that the fee will increase by 20%. Some private schools may decide to charge higher fees than others.
On average, the government expects fees to rise by about 10 percent.
The Institute for Fiscal Studies (IFS) think tank says the average cost of private school fees has risen by 55 per cent since 2003, even without VAT.
However, there has been no decline in the proportion of privately educated children during this period.
Campaigners had argued that VAT should not be included in fees for small religious schools, international schools or families with children with special educational needs.
But only those who have a local authority Education, Health and Care Plan (EHCP) that names a particular school will be exempt.
The government says the grant is being increased to cover boarding school fees for children of military families in view of rising charges.
What could tax reform mean for state schools?
The government does not expect any significant impact on the number of students attending private schools.
He estimates that about 37,000 students will move to the state sector in the long run, but he believes class sizes will not increase.
It points to research by the IFS which says the state sector will be able to “easily accommodate additional students” as the total number of students is set to fall by 700,000 by 2030.
This shortfall is more than the total number of children currently studying in private schools.
However, student numbers are not falling equally everywhere, so some individual state schools may face pressure on class sizes.
The Independent Schools Council (ISC), which represents more than 1,400 private schools, says some of its members reported a 4.6% drop in Year 7 students in September 2024..
The ISC believes that the government has underestimated the level of student migration it will cause.
In October 2024, the organization said It will proceed with plans for a legal challenge to the policy.. It argues that the tax changes violate the European Convention on Human Rights in two respects: the prohibition of discrimination, and the right to education.
The Treasury said it would not comment on potential litigation.