VAT on Private Schools: Labour Finally Implements Long-Term Goal

by Zafeera Abdoola, Junior Reporter, BA Politics and Global Development 03/02/2025

As of January 1^st 2025, a VAT of the standard 20% will be placed on tuition fees for private education in the UK. Previously classed as exempt from taxation because the goods and services provided by private schools are education, private schools will now contribute to a redistribution of wealth towards state schools in an attempt at reducing educational inequality.

This decision comes after a long battle to improve the quality of education and school experience of children in state schools. In 2017, Labour’s general election manifesto said that it would ‘remove the VAT exemption on private school fees’ with the intention of using this money to implement free school meals for all primary school children. The discussion continued in 2019 as the party’s manifesto aimed to ‘close the tax loopholes enjoyed by elite private schools’ with the more vague intention of ‘improving the lives of all children.’ In January 2023, whilst debating the Labour motion which called for a new select committee to analyse and reform the tax status of independent schools, Bridget Phillipson, the Shadow Secretary of State for Education at the time, argued that ‘at a time of economic uncertainty, asking the public to subsidise a tax break for private schools is inexcusable.’ She claimed that the 20% VAT on private schools would raise £1.7 billion, which could contribute to the improvement of state schools. 

Some worried that the tax would reduce bursaries and scholarships available which would further negatively impact lower income households. Phillipson responded by showing that a select few bursaries and scholarships available did little to rectify the inaccessibility of private education. She stated that ‘the Independent Schools Council’s own figures [show] that a mere 8% of children get means-tested fee support.’ 

The Labour Party’s dedication to taxing private schools remained, and in its 2024 general election manifesto, the party resolved to ‘end the VAT exemption and business rates relief for private schools to invest in our state schools.’

James Murray, the Exchequer Secretary to the Treasury, confirmed the plan to introduce the 20% VAT on private school fees. In a written statement, he also clarified that this tax will not extend to ‘pupils with the most acute special educational needs, where their needs can only be met in private schools.’ In addition to the implementation of taxation, Murray also stated that, starting April 2025, ‘where a school in England has charitable status, the Government will legislate to remove their eligibility for business rates charitable rate relief.’ 

This new policy is applicable to the full-time private education of pupils who are at the age of compulsory education and will not extend to nurseries or public colleges. Murray justified it as a ‘tough but necessary decision that will secure additional funding to help deliver the government’s commitments relating to education and young people, including opening 3,000 new nurseries, rolling out breakfast clubs to all primary schools and recruiting 6,500 new teachers.’

Some argue that this taxation will lead to a migration of private school attendees to turn to state education, which would place more strain on an already struggling public education sector. However, it is estimated that around 37,000 pupils will do this, amounting to only 6% of current private school pupils. Keir Starmer has vocalised faith in the private school sector’s ability to adapt, stating that, ‘there is no evidence to show these schools will close.’ 

However, for many, this is not necessarily a positive change. Private school graduates have found top universities and subsequent jobs more accessible than the state-educated. In this regard, Starmer’s words of encouragement towards private schools - including his statement that he ‘wants them to thrive’ - may seem unsettling to those who view the removal of the VAT exemption as a step toward a more meritocratic society. 

Whilst private schools take a financial burden from state education, the social and economic consequences of the trajectories of pupils’ lives being determined by their parents’ abilities to pay private school fees seem like a steep price to pay. The question of whether private and state education can coexist in a way that allows and actively enables social mobility still remains; but hopefully, the implementation of this tax will mean steps taken towards a fairer educational system.