Parents pay £500m to avoid gov’s private school VAT plan
According to accounts, the top 50 independent schools received £515m in advance fee schemes last year, up from £121m in 2023
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Parents at UK private schools have reportedly paid over £500m of school fees in advance in a bid to avoid a VAT raid by the Labour government.
According to The Telegraph, the most expensive private schools received “hundreds of millions of pounds” in fees upfront last year as parents looked to avoid the 20% tax raid which came into force on 1 Jan 2025.
Last year it was announced by the government that all education and boarding services provided by a private school or “connected person” would be subject to VAT at the rate of 20% from the start of this year.
However, according to accounts, the top 50 independent schools received £515m in advance fee schemes last year, up from £121m in 2023.
The Telegraph said these findings could mean the wealthiest parents may have avoided up to £103m in VAT, since they are thought to have handed over the fees before the government-imposed deadline when tax would start to be charged on advance fees.
It added that the scale of the advance payments has “stunned” tax experts, who warned it could challenge Labour’s plans to raise revenue.
Brighton College, the most expensive private school in the UK, recorded total prepaid fees of £50.1m in last year’s accounts, up from £4.1m in 2023. The number of pupils covered by the school’s fees through an advance scheme soared from 86 in 2023 to 819 last year.
Meanwhile, at Eton College, the total money in its prepayment scheme rose from £16.6m in 2023 to £52.7m last year.
Sources suggested to the paper that chancellor Rachel Reeves could consider ways to “claw back” the lost VAT.
The Office for Budget Responsibility (OBR) is said to have factored the use of prepayment schemes into its forecasts for how much money would be raised by the VAT scheme.
However, the rise in advance fee payments could “raise serious questions over official predictions”.
The Telegraph’s analysis also found that parents at many schools tried to cover fee bills for as many as five years upfront before last summer’s deadline, meaning they may avoid Labour’s tax raid altogether if it is cancelled by a future government.