“Labour will end the VAT exemption and business rates relief for private schools”
The government has produced legislation that would apply VAT at the standard rate of 20% to private schools from 1 January 2025. It has said it will remove private schools’ eligibility for charitable business rates relief in England from April 2025, but this legislation has not yet been published.
Private schools (also known as independent schools) are schools which charge fees for pupils to attend, instead of being funded by the government.
Value Added Tax (VAT) is a tax paid on most goods and services, the standard rate of which is 20%. Currently, private schools are among the eligible bodies that provide education and are exempt from VAT.
Ending the VAT exemption for private schools, as Labour’s manifesto pledged, would mean services offered by private schools are charged 20% in VAT.
About half of private schools in England have charitable status. Charities can claim up to 80% relief on business rates, a tax on non-domestic properties paid to local authorities (unless exempt). Some local authorities may pay the remaining amount on behalf of the charitable organisation.
Business rates are devolved, and so we’ve assumed this element of the pledge applies to England only. Scotland removed the charitable business rates relief for ‘mainstream’ private schools on 1 April 2022, leaving it in place for special schools and certain music schools. In September 2024, the Welsh government announced a consultation on charitable non-domestic rates relief for private schools, and has proposed withdrawing the relief.
By contrast, VAT is reserved, so changes made by the Labour government at Westminster would apply to all four UK nations.
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After committing to bringing forward measures “to remove the exemption from Value Added Tax for private school fees” in the King’s Speech, on 29 July 2024 the government announced VAT at the standard rate of 20% would be applied to private school fees from 1 January 2025. It said the 20% rate will also apply to fees for terms starting on or after 1 January 2025 if the payment was made on or after 29 July 2024.
The government also said it doesn’t expect applying VAT “will cause private school fees to go up by 20%”, as private schools “don’t have to reflect the VAT increase in the amount fee payers are charged”.
The Finance Bill published following the Autumn Budget included provisions for the removal of the VAT exemption for private schools. The bill needs to complete its passage through Parliament before these can take effect.
The government said local authorities will be able to reclaim VAT for pupils with special educational needs whose needs can only be met in private schools, and whose places are funded by local authorities. On 30 October 2024, the government published a policy paper for its proposed VAT changes, including an economic impact assessment.
The government said in a technical note that “the decision has been made to remove the business rates relief that private schools benefit from”, and that primary legislation will be brought forward after the Budget “to amend the Local Government Finance Act 1988 to end relief eligibility for private schools intended to take effect from April 2025”. The government reaffirmed this in its Autumn Budget. As of early November 2024, this legislation had not yet been published.
As we develop this Government Tracker we’re keen to hear your feedback. We’ll be keeping the Tracker up to date and adding more pledges in the coming months.
Full Fact tracks Labour’s 2024 manifesto pledges
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