On the up? School fees and VAT

For many parents, one of the most important elements of a financial divorce or separation agreements is deciding how private school fees will be paid, and indeed if they remain feasible with the costs of two households.

At the time of writing (pre the July 2024 election) there is no VAT applicable on private school fees. However, the Labour Party leader Sir Keir Starmer has included plans in the party’s manifesto to add VAT to school fees. This could affect up to 556,551 pupils who are educated in fee-paying independent schools in the UK.

The Labour Party manifesto states that:

“Private schools currently benefit from an unfair tax break that means they avoid paying VAT on fees. Through closing this loophole, Labour will raise vital money needed to improve standards in stretched state schools with more teachers. This funding will also help pay for mental health support staff in every school, working to boost the wellbeing of young people.”


Payment of fees post separation

According to the Independent Schools Council (ISC), school fees rose by 8% from 2023 to 2024, with most day schools charging between £3,000 and £6,000 per term (up to £18,000 per year).

Residential private school fees are higher, with Eton quoting £17,583 per term for tuition, board and lodging, (£52,749 per annum) plus initial registration and acceptance fees of £3,800 at the time of writing.

If VAT was to become applicable, private schools would either have to absorb the 20% loss in income or pass it on to parents. As one independent school head told the BBC:

“Sadly, that is going to have to be passed on. As a result, it may be that some parents cannot afford to bring their children into our school and so would have to leave and go into the state school sector, which is already struggling … Most of our pupils here, both of their parents are working hard. In some cases aunts, uncles and grandparents are contributing, because they want the best opportunity to stay here."


School fees and SEND children

We have written a series of articles over the past 10 years on the issue of school fees in divorce, and it remains a major concern for parents who wish their children to experience a private education.

It will also be a major concern for those with SEND children. As the government’s own “Special Educational Needs and Disabilities (SEND) and Alternative Provision (AP) Improvement Plan” states:

“Independent special schools represent a third of special schools and educate 5% of pupils with EHC plans.”

According to the ISC:

“(ISC) schools have also been providing a record amount of support for students with SEND. The number of students receiving SEND support has increased by 8% since last year (2023), and over 100,000 students in ISC schools now receive some kind of additional support despite not being in receipt of an EHCP.”

The proposed VAT application will be of particular concern to parents whose local authority funds their children’s school fees under their Education, Health and Care Plan (EHCP). Cash-strapped local councils may no longer be able to offer full payment or decrease partial payment of the fees that would be set to rise by the current rate of VAT at 20%.

In addition, according to a BBC report this week:

“Councils in England are forecasting a massive shortfall in budgets for supporting children with special educational needs.”

Local councils are legally obliged to meet the needs of any child with an EHCP. However, with a 26% rise in the number of these plans last year, budgets are not meeting demand. The local authorities in England contacted by the BBC collectively forecasted a SEND spending deficit of £926m for 2024.


School fees and separation agreements

AT LGFL, we specialise in complex financial settlements, and have considerable experience in ensuring that any agreement is based on a holistic overview supported by full and frank disclosure. This will include assessing the needs for all the family, including children and parents, to create a fair and balanced agreement outside of court.

We have issued and opposed many school fees applications. Ultimately, the court’s decision is based on the welfare of the chlid. The courts see school fees as a luxury, and secondary to essentials such as housing and utilities.

Often following separation, it is a challenge to make the numbers add up when running two households. If Labour’s VAT plans come into place, then it is likely for many that this is a stretch too far.

To discuss your specific circumstances and requirements, contact us:

- Call us

- Email us

- Request your reduced fee consultation


Our previous articles on school fees

For more information, see our other articles on school fees for separating parents, including: