Shropshire Business Talk: Advice for families who send their children to private schools

Under new rules, from January 2025 private school fees will no longer be exempt from VAT so families will face an extra 20 per cent on their bills.

Julie Selley, of Dyke Yaxley Chartered Accountants in Shrewsbury, said: “The rules mean that any pre-paid fees paid between July 29 and October 30 would still be exempt from VAT – but if any fees are paid at this time for January and beyond, they will be subject to VAT charges.

“Thankfully parents who have already paid fees upfront by July 28, 2024, will not be charged VAT retrospectively – this was a genuine concern when the plans were first under discussion.

“The new rate will though be applied to boarding and lodging fees, but all other goods and services provided for the pupils’ use will still be exempt, as will any goods supplied by another service.

“Just like any other VAT-registered business, private schools will be able to reclaim VAT paid on all goods and services used in the production of their taxable supplies.

“But the Treasury has asked schools to take steps to minimise any overall fee increases rather than simply pass the increase on to parents.”

Julie said private schools would also have to charge VAT on out of hours activities as well as school holiday clubs, but before and after school childcare would still be exempt.

“Any nursery classes provided at private schools will also remain VAT free as they are classified as schooling of children below the compulsory school age.

“Any special needs pupils who receive funding as state schools cannot accommodate them will see their funder receive compensation for the VAT they are required to pay, which is good news as it will encourage charitable organisations to continue to help pupils receive the education they need.”

Julie said the changes could prove extremely challenging for families who may find the costs of attending a private school were now beyond their reach.

“The draft legislation is still under consultation until September 15, but it’s vital that families are prepared for the changes well in advance in order to plan their finances accordingly.”