Private School VAT 2026/27: 20% on Fees from January 2025
VAT on UK private school fees: 20% since 1 January 2025 (Finance Act 2025), EHCP places, bursaries, business rates and the cost to parents.
What changed on 1 January 2025
Since 1 January 2025, all education and boarding services provided by a private school, or a person connected with it, for a charge have been subject to VAT at the standard rate of 20% across the UK (HMRC policy paper). The government announced the measure on 29 July 2024; fee payments made from that date for terms starting on or after 1 January 2025 were also brought into the charge. The legislation is Finance Act 2025 s.47, which added exceptions to the education exemption in VAT Act 1994 Schedule 9 Group 6.
VAT at 20% does not mean fees rise by 20%. Schools registered for VAT can now reclaim VAT on their own costs, and HMRC expects that after doing so schools on average will be liable for VAT amounting to about 15% of fee income, though this varies by school.
Separately, in England, private schools that are charities lost charitable business rates relief from 1 April 2025 under the Non-Domestic Rating (Multipliers and Private Schools) Act 2025 (MHCLG impact note).
Which fees are charged, and which are not
- Charged: tuition and closely related boarding at a school providing full-time education to pupils of compulsory school age for a fee, and at private sixth form colleges. Registration fees paid during the application process are also subject to VAT (HMRC).
- Not charged: nursery schools, and nursery classes in private schools made up wholly or almost wholly of children under compulsory school age; HMRC's example is a class that is 90% or more under-fives (HMRC).
- EHCP places funded by the local authority: VAT is charged to the local authority, which reclaims it under section 33 of the VAT Act, so the family does not bear it.
- Bursaries: VAT is due on the whole fee where part is met by an external bursary; a bursary the school funds itself is outside the scope of VAT.
- Packages: education sold with meals or transport for one fee is normally a single supply with one VAT liability; items sold for a separate fee are normally separate supplies.
What a fee rise costs in gross pay, 2026/27
Illustration, if the school passes on the full 20%. Marginal rate = Income Tax plus employee NI above the Upper Earnings Limit, England, Wales and Northern Ireland rates.
| Annual fee before VAT | VAT at 20% | Marginal rate | Gross pay needed |
|---|---|---|---|
| £22,000 | £4,400 | 42% | £7,586 |
| £50,000 | £10,000 | 47% | £18,868 |
Expected revenue
HMRC's policy paper gives the Exchequer impact from Autumn Budget 2024 Table 5.1, certified by the Office for Budget Responsibility:
| 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 |
|---|---|---|---|---|---|
| +£460m | +£1,505m | +£1,560m | +£1,610m | +£1,665m | +£1,725m |
Planning points for families
- There is no Income Tax relief for school fees, and no relief for parents on the VAT.
- If a child has an EHCP, check whether the plan names the school and the local authority funds the place: only then does the authority meet and reclaim the VAT.
- Ask whether a bursary is funded by the school (VAT on what you pay) or by an outside body (VAT on the whole fee).
- Grandparents' regular payments out of income can be free of Inheritance Tax as normal expenditure out of income, if they can afford them after meeting their usual living costs; other gifts can use the £3,000 annual exemption or the 7-year rule (GOV.UK).
Related calculators and guides
- Salary calculator - work out the gross pay needed for extra fee costs at your marginal rate.
- UK Inheritance Tax rules guide - gifts out of normal income.
- IHT gift taper calculator - the 7-year clock for other gifts.
- ISA allowance guide - including the Junior ISA.
- UK VAT rates guide - standard, reduced and zero rates.
- Budget 2025 summary
Frequently asked questions
When did VAT on private school fees start and what rate applies?
Since 1 January 2025, education and vocational training provided by private schools in the UK for a charge, and boarding closely related to it, have been subject to VAT at the standard rate of 20%. The change was made by Finance Act 2025 s.47, which inserted exceptions into the education exemption in VAT Act 1994 Schedule 9 Group 6. Fees paid from 29 July 2024 for terms starting on or after 1 January 2025 were also brought into the charge, so pre-paying did not avoid it.
Which schools are caught?
A private school for these purposes is a school that provides full-time education to pupils of compulsory school age for a fee, or an institution mainly providing full-time education to 16 to 19 year olds where most of that education is paid for, such as a private sixth form college. Nursery schools are not caught, and nursery classes in private schools made up wholly or almost wholly of children under compulsory school age (HMRC gives 90% or more as an example) stay exempt. A school must register for VAT if its taxable turnover over the last 12 months is over £90,000, or it expects to receive more than £90,000 in the next 30 days.
Do schools have to raise fees by 20%?
No. VAT at 20% is charged on the fee, but schools can now reclaim VAT on their own costs, such as capital spending and educational supplies. HMRC expects that, after recovering VAT on costs, schools on average will be liable for VAT amounting to about 15% of fee income, varying between schools. How much is passed to parents is each school's commercial decision.
Do children with an EHCP pay VAT on private school fees?
VAT is charged on the fees, but families do not bear it where the local authority funds the place. Where a private school is named in a pupil's education, health and care plan and the local authority funds the place, the school charges VAT to the local authority and the authority reclaims it from HMRC under section 33 of the VAT Act. In Northern Ireland the Education Authority funds such placements and reclaims the VAT. Where parents pay for a place themselves, including with an EHCP that does not name the school, the fees are subject to VAT in the usual way.
How are bursaries and scholarships treated?
VAT is due on everything the school receives in return for the education. If part of the fee is paid by an external bursary, VAT is due on the whole fee, including the bursary part. A bursary the school funds itself is outside the scope of VAT, so in practice VAT is due on what is actually paid for the place.
What happened to business rates relief?
In England, private schools that are charities lost eligibility for charitable rate relief from 1 April 2025, under the Non-Domestic Rating (Multipliers and Private Schools) Act 2025 (Royal Assent 3 April 2025). Charitable rate relief is a mandatory 80% relief, which councils can top up. Schools wholly or mainly providing full-time education to pupils with an EHCP keep the relief, and schools wholly used for the training or welfare of disabled people remain exempt from rates.
How much extra do parents pay in take-home terms?
If a school passed on the full 20%, fees of £22,000 would rise by £4,400. A parent paying from net pay at the 42% higher-rate marginal (40% Income Tax plus 2% employee NI above the Upper Earnings Limit, England, Wales and Northern Ireland) would need about £7,586 of extra gross pay to cover it. For £50,000 of boarding fees the rise would be £10,000, needing about £18,868 of gross pay at the 47% additional-rate marginal. Where a school passes on less than 20%, scale these down.
Is there any tax relief for parents on school fees?
No. School fees are not deductible for Income Tax, and there is no relief for parents on the VAT. Where grandparents help, regular payments made out of their income can be free of Inheritance Tax if they can afford them after meeting their usual living costs, as normal expenditure out of income. Other gifts can use the £3,000 annual exemption, or become tax-free if the giver survives 7 years.