August 12, 2024
New VAT charges on private school fees: What Parents and Grandparents should do
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The 20% VAT will also apply to any pre-payments of fees made on or after 29 July 2024, scuppering the plans of many parents and grandparents hoping to bypass some of the increases.
Rachel Reeves has confirmed the proposed 20% VAT charges on private school fees will become applicable from January 1st 2025, considerably earlier than first expected. The 20% VAT will also apply to any pre-payments of fees made on or after 29 July 2024, scuppering the plans of many parents and grandparents hoping to bypass some of the increases.
Although VAT is charged at 20%, the government “does not expect fees to go up by 20 per cent as a result of this policy change”*. The government thinks private schools will take steps to “minimise” increases by reclaiming the VAT they pay on “goods and services used in the production of their taxable supplies”. Based on these assumptions the government expects schools to be liable for VAT amounting to approx. 15%.
Whilst the exact increase to fees will be dependent upon individual schools, there are still some practical steps for parents to consider:
Stay informed – Keep up to date on any official announcements from the Government and educational bodies
Talk to your school - Discuss the VAT impact with the school. They may have insights into how they plan to manage the proposed change and whether there will be adjustments to fee structures to account for recoverable VAT.
Plan for increased costs - Factor in the additional expense when budgeting for school fees. Explore potential adjustments to the rest of finances to accommodate the rise in cost.
Explore alternatives - Depending on the severity of the cost increase, some families might need to consider alternative schooling options. Research state-funded schools or scholarships offered by private institutions.
This is still an evolving situation but by staying informed, proactively planning, and seeking professional advice, parents and grandparents can make informed decisions regarding the increase to private school fees.
By Daren Wallbank
*https://www.gov.uk/government/publications/vat-on-private-school-fees-removing-the-charitable-rates-relief-for-private-schools (see technical note download)
Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited 08/09/2024
