How to Avoid VAT on School Fees

The future of VAT on private school fees has become a growing concern for many UK parents. With government plans to introduce VAT on independent education, families paying school fees could face significant increases in their annual outgoings. So what are the proposed changes, when are they likely to take effect, and is there any way to avoid or reduce the impact of VAT on school fees?

This guide explains the upcoming VAT legislation, what it means for parents and schools, and whether there are any legal options for minimising the additional cost.

What Are the VAT Changes on School Fees?

Under current UK law, school fees charged by independent schools are exempt from VAT. However, the Labour Party has announced plans to remove this exemption if elected into government. This would mean private school fees would be subject to the standard rate of VAT, currently 20%.

The proposal includes charging VAT not only on tuition, but potentially on other costs such as registration fees, boarding, and extracurricular activities, unless specifically exempted.

When Will the VAT Change Take Effect?

There is no confirmed date yet. The VAT change is dependent on a Labour government coming to power and passing new legislation. The party has said it would implement the change "quickly," but this would still involve parliamentary process.

Even if introduced soon after an election, it's unlikely to apply retrospectively, meaning any new rules would only apply from a future date set in the legislation.

What Does It Mean for Families Paying School Fees?

If VAT is added at 20%, a school charging £18,000 per year would need to charge an additional £3,600 in VAT. Some schools may absorb part of the cost, but in many cases, this will be passed on in full to parents.

This is expected to make private education less affordable for many families. Some schools are exploring charitable structures or alternative business models, but no large-scale exemptions are currently available under VAT rules.

What About Other Fees Charged by Schools?

It’s not just tuition fees that may be affected. The VAT could also apply to:

• Registration and administration fees

• Exam charges

• Uniforms and textbooks

• Boarding

• Clubs and extra-curriculars

Each of these would be assessed under VAT legislation. If schools supply these as part of a single package, the whole package may become subject to VAT.

Some items, such as school meals and transport, may remain zero-rated or exempt depending on how they are billed.

How Will This Affect Schools and Organisations That Hire School Facilities?

Businesses and community groups that hire school facilities—such as sports halls or theatres—could also be affected. If the school loses its VAT exemption, it may need to charge VAT on facility hire too.

This could increase costs for dance schools, community groups, or sports clubs using school premises for after-school activities.

Is There Any Way Parents Can Avoid Paying VAT on School Fees?

There is currently no guaranteed way to avoid VAT once it’s introduced. However, some families are looking into options such as:

• Paying school fees in advance: Some schools may allow upfront payment for future years at the current VAT-exempt rate. Whether this will be honoured under new rules is uncertain and could depend on the legislation’s wording.

• Using trust or grandparental funding: While this doesn't reduce the cost, it may offer some financial planning advantages when combined with inheritance or income tax planning.

• Switching to registered charities: Some schools may explore operating parts of their education provision through charitable arms, but this is complex and may not guarantee exemption from VAT.

There is currently no legal exemption or loophole for families to simply opt out of the charge.

Why Has the VAT Exemption for Schools Been Targeted?

Labour argues that removing the VAT exemption will raise revenue to invest in state education. The move is part of a wider plan to rebalance funding and reduce inequality between independent and state sectors.

Critics argue that the policy could backfire if many students leave the private sector, putting further pressure on state schools and reducing the expected tax revenue.

Final Thoughts                                 

While the VAT change on private school fees hasn’t come into force yet, it is likely to be introduced if Labour wins the next general election. Parents currently paying school fees should stay informed and consider speaking to their child’s school about payment options or any planned changes.

Although there’s no guaranteed way to avoid the VAT once introduced, some schools may offer advance payment schemes or restructure their pricing. If you're concerned about affordability, now is the time to seek financial advice and explore your options.