UK VAT on Private Schools: Key Changes & Impact on Education

Earlier this year, the UK government announced that it would end tax breaks and benefits for private schools as part of the initiative to improve standards and conditions for public school children. As October 30th approaches the effective date of this measure, the Department of Education published all relevant details about the newly introduced VAT on private education.

Key Takeaways and Their Impact

After the effective date, all the school and boarding fees for school terms starting on or after January 1, 2025, are subject to a standard VAT rate of 20%. Private schools that provide educational onboarding services or vocational training must register for VAT if their turnover has been above GBP 90,000 in the past 12 months or if they expect it to be in the next 30 days.

However, private nursery schools or classes are exempt from VAT, as they do not fall under the scope of the “private school” definition—at least not from a VAT perspective. 

The registration deadline depends on when the private school receives payments for in-scope transactions. This means that schools may have to register for VAT even before January 1, 2025.

As stated by the Department of Education (DOE), they do not expect this measure to affect private school fees; they do not expect an increase due to the imposed 20% VAT. Even if it happens, DOE believes it will be minimal.

On the other hand, this measure is estimated to generate GBP 1.3 to 1.5 billion in taxes annually, which will finance public schools.

Conclusion

How private schools react to this policy change and whether they raise fees largely depends on them. As they operate as businesses in the education sector, they can decide whether to increase costs due to the 20% VAT rate. 

However, all those affected by the new VAT policy must estimate whether they are subject to these changes and whether they need to register for VAT. 

Source: HMRC, Department of Education - The Education Hub