VAT increases on private schools’ fees spark legal challenges

The pledge to remove the VAT exemption and eligibility for business rates and charitable rates relief for private schools was outlined in the Labour Party Manifesto. In the chancellor’s budget she stated that 94% of children in the UK are attending a state school, and therefore the government’s priority is to provide a high-quality education to those within state education. 

From 1 January 2025, all private school and connected boarding services fees will be subject to VAT at the standard rate of 20%. Where previously there has been a VAT exemption for private education, the government are now removing the exemption. Any fees paid from 29 July 2024 will be subject to the new VAT expectations.

In terms of business rates, from April 2025, the government is removing charitable business rate relief, which provides private schools with an 80% discount on the rates they pay on their premises. 

In addition, the budget also revealed an increase in employers’ contributions to National Insurance, which will take effect at the start of the next tax year in April 2025. State schools will be fully reimbursed for the rise in National Insurance, but private schools will not be. 

Sponsored

While it is at the discretion of the private schools how these additional financial obligations are reflected in the amount of fees charged, this policy could see parents paying increased fees for their child(ren) to attend school this academic year.

Many MPs, from across differing parties, are concerned with the implications of this policy. 

The wider media and political conversation have often assumed that this policy only affects the wealthy and elite private institutions like Eton College. However, many independent schools, faith schools and those providing education supporting children’s Special Educational Needs and Disability (SEND) provision are also impacted by this change.

There are around 111,000 children in private education with special educational needs, but only the 8,000 with Educational Care Health Plans (ECHP) will have access to immediate support outside of the private sector.

In an economic impact briefing shared with the Evangelical Alliance, the Independent School Council outlined that the VAT increase will make independent faith schooling unaffordable for many families and negatively impact local economies in Scotland and Wales due to the possibility of schools closing and the resulting loss of revenue.

We are aware of three organisations making legal challenges in response to the Autumn Budget and the VAT increase on private schools:

1. The Independent Schools Council (ISC), an association that brings together over 1,400 independent schools and responsible for educating 500,000 children, have launched legal action. Almost half of ISC schools have a religious affiliation or ethos, the majority Christian. 

The case will centre on the ISC’s belief that the VAT change breaches the European Convention on Human Rights (ECHR) and the Human Rights Act 1998, which they claim is obstructing the right of educational choice. The ISC believe they are defending the rights of families who have chosen independent education but who, due to the government choosing to tax private education, may no longer be able to do so. 

2. Next, the Christian Legal Centre are assisting three faith schools working to launch a judicial review in January after the new financial regulations are in place. The case is working from the belief that the government’s policy is breaching human rights regarding protection from discrimination.

3. The third challenge has been launched by parents with the support of Education Not Taxation, a parent organisation opposing the policy change. The parents taking legal action believe this policy change will negatively affect the education of their children with SEND. The legal case is based on the view that the government’s policy violates the human rights of parents and children.

If any of the cases above win their legal action, and the legislation is declared incompatible with human rights, then the legislation will return to parliament for reconsideration. 

This incoming change will undoubtedly have an impact on private education. For schools, teachers, parents and children, this change feels uncertain. 

Schools and teachers: 

Practically, for individual schools struggling to navigate the impending changes around business rates and charitable status, the ISC recommends you connect with the Independent Schools Bursars Association (ISBA). They are producing guidance for schools, and it is free to join till 31 December. 

In addition, Evangelical Alliance member organisation The Independent Schools Christian Alliances provides pastoral support and resources for faith schools and teachers.

Parents:

We encourage you to speak with your school to learn about the decisions they may take from January 2025. It is also a great opportunity to email your local MP to share how the VAT increases impact your family finances, child’s education or access to schooling in your area should you need to change schools. You can email your MP via the TheyWorkForYou website.