Tax news · June 2026
Private school fees now carry 20 per cent VAT. Here is what changed, who it affects, and what families and schools can do about it.
One of the most talked about tax changes in years took effect at the start of 2025, when VAT was added to private school fees for the first time. Education had long been exempt from VAT, but that exemption was removed for private schools, and fees now carry the standard 20 per cent rate. For many families this has meant a sharp rise in the cost of a private education, and for schools it has brought a significant new layer of tax to deal with.
From 1 January 2025, fees for private school education and for vocational training, including boarding, became subject to VAT at 20 per cent. There were also anti forestalling rules, which meant that fees paid in advance before the change, but relating to terms after it, were still caught, to stop families simply prepaying years of fees to dodge the tax. Schools can now reclaim the VAT on many of their own costs, which softens the blow a little, but most of the increase falls on parents.
The obvious group is parents paying private school fees, who have seen the headline cost rise, although not always by the full 20 per cent, because some schools absorb part of it or can reclaim input VAT on their spending. Schools themselves are affected too, as they have had to register for VAT, change their billing, and manage their costs carefully. Children with certain special educational needs whose places are funded by a local authority are treated differently, and that funding can still be recovered.
For families, the practical steps are about planning the cost. That can mean budgeting for the higher fees, talking to the school about bursaries or payment plans, and in some cases looking at whether grandparents can help in a tax efficient way, for example by using their own income or gifts within the inheritance tax rules. Some families look at funding fees from investments or a family company, where the structure can make a difference, and that is worth proper advice rather than guesswork.
This is a genuinely difficult change for affected families, and there is no clever trick that makes the VAT disappear, despite what some schemes have claimed. Our honest view is to be wary of anyone promising a way to avoid the VAT, because the anti forestalling rules were specifically designed to catch the obvious moves. What does help is sensible, lawful planning around how the fees are funded and who pays them, looking at the whole family picture. For grandparents in particular, helping with fees can sometimes also be efficient for inheritance tax, so it is worth joining up the two.
We help families plan how to fund school fees in the most tax efficient lawful way, looking at income, gifts, investments and the wider inheritance tax position, and we help schools and small education businesses with their VAT. Book a free call back and we will look at your situation.
Yes. From 1 January 2025, private school fees, including boarding, carry VAT at the standard 20 per cent rate. Schools can reclaim VAT on some of their costs, so the increase passed to parents is not always the full 20 per cent.
No. Anti forestalling rules catch fees paid in advance before the change that relate to terms after it. There is no simple way to avoid the VAT, so be wary of schemes that claim otherwise.
We will help you plan the most tax efficient lawful way to pay, across income, gifts and inheritance tax. Book a free call back.