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What happened and when
From 1 January 2025, private school fees became subject to VAT at the standard rate of 20%. Education, vocational training and boarding provided by a private school are all within scope. The exemption that had applied to education was removed for these providers.
Nursery provision remains exempt where a provider only offers nursery education.
What it meant in practice
Schools became VAT registered businesses, and that cuts both ways. They must charge 20% on fees, but they can also now reclaim input VAT on their costs, which they never could while their supplies were exempt. That includes VAT on building work, IT, catering and professional fees.
This is why fee increases were generally less than 20%. A school reclaiming VAT on substantial costs could absorb part of the charge. The schools with big recent capital projects were in the best position, because they could recover VAT on that spend.
There were also anti forestalling rules, which caught the schools and parents who tried to prepay several years of fees in advance to beat the start date. Prepayments made from 29 July 2024 for terms starting on or after 1 January 2025 were brought into charge. If you did that, it did not work.
If you pay school fees
Check what your school actually did. Some passed on the full 20%, some absorbed a portion, some restructured what they charge for. Fees, boarding and some extras are treated differently.
If you have a grandparent or family trust arrangement paying fees, it is worth reviewing, because the numbers that made the arrangement work may have changed.
Bursary and means tested support is worth asking about directly. Schools vary enormously in what they offer and many do not advertise it.
If you run or advise a school
The partial exemption position is where the value is. Getting the input VAT recovery right, particularly on capital projects and on the Capital Goods Scheme, is complex and it is where the money is.
Business rates are a separate question and were treated differently again, so do not assume the two changes are linked.
Common questions
Did fees go up by 20%?
Mostly not. The average increase was lower because schools could recover input VAT for the first time. It varied a great deal between schools.
Can I reclaim the VAT?
Not as a parent. VAT on school fees is a cost to you like VAT on anything else you buy personally. There is no mechanism for individuals to recover it.
This reflects HMRC guidance and the position since 1 January 2025. School fee VAT and partial exemption is genuinely specialist work. If you need help with the numbers, get in touch.