VAT on private schools: Families set to pay 'thousands' more in fees - with some turning to borrowed money

• Under a new government policy, private schools are being charged VAT on fees from this month
• Many schools have responded by increasing what parents pay for their children to attend
• A lending company has calculated that families will end up paying thousands more on average - more than £8,000 a year in one county

The new year means new levies for the UK’s private schools - and in many cases, fees rising for families.

From this month, January 2025, private schools are no-longer exempt from paying the standard 20% VAT (value added tax) on fees they charge, under a new government policy. Those that operate as charities will also lose their 80% rates relief discount from April.

The government has described the move as closing a tax loophole for private schools, with the extra money to go towards improving state schools - which educate some 94% of UK students. But it has been met with fierce criticism on several fronts, with many schools responding by increasing their fees. As many as 100 thousand families may be priced out, the Telegraph reports, while military families and those with a child with SEND (special educational needs and disabilities) have also raised concerns about what it will mean for them.

Lending company Pepper Money recently researched fees from across the UK for 11 to 16-year-olds in full-time private education - representing more than 600 schools - to understand the potential impact the VAT change might have on families. The average cost to put a child through private education was £17,128 a year, their experts found, which with a 20% increase turned into £20,596 - a nationwide average increase of £3,468 per year.

It could have a big impact, the company says, from more families applying for bursaries, to parents going into debt. According to survey data, before the new year about 90% of parents were using their monthly income and income from investments to pay school fees. Nearly a quarter (23%) now planned on using credit cards to cover the extra 20% school fee rise. Some had even reported considering selling their home.

“Private education comes with significant financial commitments, often running into tens of thousands of pounds per year, “ Pepper Money finance expert Ryan McGrath said. “When you factor in additional costs like uniforms, extracurricular activities, and school trips, the total expenses can be staggering.”

“For many families, covering these costs with credit cards or loans means dealing with high interest rates, which only add to the overall financial burden,” he added.

How much could fees go up across the country?

According to Pepper Money’s research, not all parts of England would be impacted equally. By region, families in the East of England were paying the most for a private education on average at £20,658. A 20% increase represents an extra £4,644 per year - or £25,303 total.

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Parents across the South East and South West could see average increases of £4,152 and £3,880 respectively, while London parents were looking at about £3,621. At the lower end of the scale were the North West, which has an average increase of £2,603 - while the North East and Yorkshire’s was £3,109.

But when broken down even further, parents in some local authority areas look set to be hit particularly hard this year - and the north of England doesn’t get off so lightly. The North East’s Redcar and Cleveland was the most expensive county in the country for private schooling, Pepper Money says, with families paying an average of £43,000 pre-January. Here, a 20% increase represented an extra £8,600 annually.

Also at the higher end, South Yorkshire’s Rotherham could see an average increase of £6,650, while the East’s Bedford sat at about £6,473, and Greater Manchester’s Tameside at about £6,300.

What do you think about the extra levies on private schools in the UK? Have your say and make your voice heard by leaving a comment below.