VAT on School Fees: What Parents Need to Know for the 2025/26 Academic Year

What is the issue with VAT?

Since the beginning of 2025, private school parents have had to pay Value Added Tax (VAT) on their child’s school fees for the first time. On the 1st January, in the middle of the school year, the standard rate of VAT – 20% – was added to school fees. The tax was introduced by Keir Starmer’s Labour Government with the claim that the tax would raise £1.8bn by 2030 and help fund 6,500 new state schoolteachers.

This was a significant shift in education policy and has already had an enormous impact on many families with children in independent education. There has been a back lash from school leaders and parents alike, with education experts warning that it would hugely damaging to the sector, forcing parents to pull their children out of their schools and sounding the death knell for many of the UK’s smaller independent schools.

A legal challenge was mounted in April 2025 by schools, pupils and parents, supported by the Independent Schools Council (ISC). Their case was dismissed in June 2025 with the court affirming the government’s legal right to proceed.

There are those who say the independent sector brought this upon itself, indulging in a fees and facilities ‘arms race’ that saw school fees outstripping inflation and rising at a rate of 5% year on year between 2000 and 2020. This has left schools with little headroom for the new VAT on fees; the 20% levy is being applied to a far greater sum than even 10 years ago and experts warned it will make independent schools largely unaffordable for the middle class. It cost parents an average of £18,456 a year to send a child to an independent day school before the VAT levy. If the same school passed on the full 20% tax, the fee would stand at £22,147. The reality, however, is most schools, particularly in London cost far more.

Example of London school fees:

St Paul’s School is £11,939 per term.

Francis Holland, Sloane Square, £10,538 per term

The Hall is £10,344 per term

Notting Hill Prep, £10,102 per term.

Are parents paying 20% more because of the VAT?

In May 2025, the ISC reported that average fees had jumped 23% between January 2024 and January 2025. This was attributed to the annual rise in fees, plus the VAT tax. Many schools, however, have avoided passing on the full 20% cost to parents by reducing their outgoings, enabling them to cut fees excluding VAT in January 2025, in an attempt to cushion the blow for parents. This will likely be added in full over several years, however.

Examples of London schools with differing VAT procedures:

• Wetherby Prep has only increased by 8.5%
• Girls Day School Trust (GDST) has increased by 12%.

Following the imposition of the tax in January, the ISC revealed in its annual census in May 2025 that numbers at its 1,423 member schools had dropped by more than 2%, or 11,000 pupils year on year.

At least 44 schools have shut in this period, citing the imposition of VAT as the final straw (dozens more have closed but not directly attributed their closure to VAT). The UK’s independent schools have been hit by a ‘triple whammy’ in the past year; the VAT on school fees plus a loss of charitable business rates relief and a rise in National Insurance employer contributions and the minimum wage in April 2025. Staffing is by far the biggest fixed cost for a school.

What will the impact be this year from VAT?

The 25/26 year is the first full academic year since the VAT levy on fees was introduced and its impact is likely to be seen more clearly as the year progresses. Fees will undoubtedly rise, schools will do everything they can to cut costs, the less oversubscribed schools will have to do everything they can to attract pupils, and the pattern of school closures and sector consolidation is sure to continue.

1. Rising fees

Fees for September 2025 have risen on average by 17.6% – the largest year-on-year increase on record. Records show a 5.3% drop in admissions figures, so far, but many industry insiders think the real figure will be more akin to 10% drop over the next few years as the impact of VAT works through.

Some 25/26 school fees: 

School:	Fee in Sep 24:	Fee in Sep 25:	% rise:
Dulwich College Boarding Fee	£51,708	£60,060	16.15% rise
Winchester College Annual Fee	£51,855	£60,000	15.71% rise

While several highly selective, prestigious schools have raised their fees significantly, there are indications that student numbers at these oversubscribed schools have been less impacted by VAT than at more affordable schools where parents are typically more price sensitive.

2. Cutting costs

Many schools have cut their outgoings in order to reduce fees. Some have had to reduce staff, subject offerings, extra-curricular activities and many have reduced their bursary provision.

Schools have already let go of part-time music teachers and grounds staff.

At SLT we have heard first hand from many of the schools we work with just how challenging the changes have been. The effect is more on the children and staff, rather than on the schools/companies behind them.

Issues involve:

• Roles and responsibilities being shared across the staff, with year groups being amalgamated and further occurrences of mixed age classes. Consequently, teachers are having to adapt the teaching and learning for a far broader range of pupils and potentially different curriculums.
• Staff salaries are not keeping pace with government rates- many staff have not had the government agreed pay rise this year and have either had a pay freeze or minimal 1% inflationary rise. This has particularly hit the younger staff who were expecting to go up the pay scale.
• Reduction in TAs/LSAs across many schools.
• Reduction in budgets for resources.
• Freeze on using external recruiters.
• Cost for trips/residential increase.
• A drop in the take up of after-school clubs and peri music lessons. This did even out over the year, but in autumn there was a noted drop by schools and external club providers.

We have seen an increase in requests from independent schools for part-time tutors to cover more niche subjects such as Latin, or teach small groups.

3. Will schools lower the bar?

Smaller, less oversubscribed schools are likely to be hit hardest this year. Some headteachers have already warned they have been left with no choice but to lower entry requirements in a bid to attract more pupils. And there is growing evidence that even prestigious schools, particularly prep schools, particularly those outside London, are not full.

4. A consolidating market

The first half of 2025 saw a rush of mergers and acquisitions as schools sought safety in numbers with many looking to larger schools, groups and private investors for safety. This is likely to continue during the next academic year.

The most common type of consolidation has been between prep schools and senior independent schools, looking to amalgamate their charitable trusts and safeguard their future with the security of economy of scale.

For example, Stowe School in Buckinghamshire merged with a third prep school when Ashfold School joined the Stowe Group late in 2024, and in May 2025, Radley College announced it would merge with the seven schools and 1,600 pupils of the Prep School Trust, including Cothill House in Oxfordshire and Beeston Hall in Norfolk, to form the Radley Schools Group. Winchester College announced a merger with The Pilgrim’s Prep School and in June, Box Hill School in Surrey was merged with the Reigate Grammar School group and renamed RGS Surrey Hills.

VAT Exemptions: Special Educational Needs and Disabilities (SEND)

Children with SEND and their families have been particularly affected by VAT on school fees. A number of families in the UK have chosen to send their children to independent schools because the greater resources, smaller classes and well-staffed SEND departments are often more beneficial for children with SEND than the overstretched system in state schools.

Children with an Educational Healthcare Plan are exempt from paying VAT on school fees. An EHCP is where a child with SEND is assessed as having such a level of need that they need to attend a specialist SEND school or independent school with strong SEND provision. The local authority must pay for the child to attend the school. The government is preparing to overhaul SEND provision and is likely to limit the number of EHCPs even more than at present. Many parents who have a child with SEND but no EHCP still choose to send their child to an independent school because of the recognised benefits. They will have to pay for the fees themselves.

Other exemptions from VAT

Other exemptions from VAT include the 32 state boarding schools in the country where the education is paid for by the state and parents only pay for the boarding fee. This fee is still VAT exempt. Some British military and diplomatic families who receive the government’s Continuity of Education Allowance (CEA) to enable their children to attend UK boarding schools have seen a 12% funding increase to help cover some of the additional cost. And a number of public schools are offering a fee reduction for military families, too.

As an educational consultancy and tuition business, we are well aware (through anecdotal evidence and our close work with families), of how the introduction of VAT has impacted school choices. We have seen very few of our clients switch to state schools, largely because our business operates at the higher end of the market. However, our research has revealed that the demand for bursaries has increased. Furthermore, for many, the VAT has provided a convenient reason to leave the independent school sector, and a number of parents are considering to move away from private to state to improve their children’s chances of securing Oxbridge offers.

What can parents do?

1. Get great financial advice

We recommend financial planning and tax advice. Unsurprisingly, we have seen an increase in parents asking us for EPP (Education Pathway Planning) consultations to discuss how to find and apply for scholarships and bursaries. (Some scholarships actually carry up to 100% fee relief such as the Orwell Scholarship for Eton College). For more information about scholarships and bursaries, please read our guide.

2. Pay fees upfront

If you have the financial reserves to do so, ask your school if this is an option. A critical point in 2025 was the imposition of the anti-forestalling rules, introduced to prevent schools and parents from avoiding VAT by paying in advance. This means that any fees invoiced after 29 July 2024 for education delivered in 2025 or later are automatically subject to VAT. But paying multiple term fees upfront gives schools much-needed financial security and may come with a small discount.

3. Make sure your school is financially viable– and providing an excellent education

For existing and prospective parents alike, it’s important to know that your child’s school has sound financial foundations and isn’t cutting back on its educational offer.

Questions parents new and old should be asking…

• Be sure to scrutinise the school’s published accounts and ask about any anomalies
• It is now essential to question the school’s CFO or bursar openly about the school’s financial underpinning. The school should be open and accountable. Be wary if they are not.
• Has the school reduced their timetabled offering, the subjects available or their teaching staff head count? Are extra-curricular activities still going strong?
• Inspect the school’s annual reports and governors’ reports.
• Ask who owns the schools and why they own the school. Understand who holds the purse strings and ask what their intentions are.
• Is the school team secure? Do you have a Head in place who is committed for the long term?
• Prospective parents – do some local sleuthing. Find out about how the school is faring from existing parents, ask about how the school has managed the VAT fallout so far.

4. Make sure your school is good value for money

Fees at independent schools across the UK vary widely with annual fees ranging from less than £10,000 a year to more than £60,000 at some boarding schools. Since Labour imposed VAT on school fees, costs to parents have increased across the country. In 2022-23, around 58% of Year 13-day fees were less than £20,000 a year. The introduction of VAT in January means that today just 25% of schools are below that threshold.

With rising costs, parents are weighing up their investment more acutely. And this starts with academic success. In short, does the school deliver the academic results to justify the the cost?

The Telegraph has analysed data on a wide range of schools, checking academic results – among other criteria – against annual fees. This provides a useful yardstick to benchmark schools by. For example, Godolphin & Latymer School, a leading girls’ day school in Hammersmith, London, had 82.2% of pupils achieving A*/A at A-level while charging annual fees of £33,678 for Y13. This makes the school very good value according to The Telegraph, compared to say, Cheltenham Ladies College, a leading girls’ boarding school which had just 69.5% of Y13 students achieving A*/A at A-level while charging annual fees of £66,870, which makes the school Below Average in The Telegraph’s table of value for money.

But academic results are just one reason parents choose an independent education for their children. They are also attracted by the ambitious curricula, fantastic opportunities and facilities (both sporting and creative), small class sizes, high teacher-to pupil ratios and emphasis on developing confidence and poise in each pupil. Traditional public schools such as Dulwich College, Radley, Tonbridge, Brighton College, Eton and Winchester all charge a large premium for what they provide but what they provide goes far beyond academic results. And this is what many parents are still prepared to pay for.

5. Consider alternatives

There are great alternatives to independent schools. Some areas of the UK have outstanding grammar schools such as Kent, Buckinghamshire and Birmingham, plus a few stellar examples in London such as Henrietta Barnett or The Latymer School. These are highly academic, selective state schools that are just as hard to get into as the most prestigious private schools.

There are also many fantastic comprehensives around the country. To find out more read our article about the differences between state and private schools.

Another option that is growing increasingly popular is home schooling. To find out more about home schooling, read our guide HERE.

How Simply Learning Tuition Can Help

Simply Learning Tuition has a big team of highly experienced tutors and educators. If you are considering a change of school for your child, or you just need some advice about next steps we can help.

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