Threads / UK Economic Policy / VAT on private school fees

Research & Analysis Published 6 May 2026 House of Commons Library ↗ View on Parliament

VAT on private school fees

Type: Commons Briefing Paper (CBP-10125) In the 2024 Autumn Budget the Chancellor announced the introduction of VAT on private school fees from 1 January 2025. This briefing discusses the background to the government's decision and the legislation to bring it into effect.

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↓ CBP-10125.pdf
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VAT on private school fees - House of Commons Library

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How does VAT work?

VAT (Value Added Tax)
is levied on the purchase of many goods and services. It is charged at the standard rate of 20%, though some goods and services are charged a reduced rate of 5% and some are charged a zero rate.

Some goods and services are exempt from the tax. The way businesses account for VAT to HM Revenue & Customs (HMRC) will differ if the goods and services they supply are exempt rather than zero-rated. However, from the perspective of consumers both zero-rated supplies and exempt supplies will be VAT-free.

What change has the Labour government made to the VAT treatment of private school fees?

Generally the supply of education is
VAT-exempt
. This has meant that historically private schools have not charged VAT on their fees.

In its 2024 general election manifesto the Labour Party stated that in government it would remove the VAT exemption that applies to private school fees. Following the election
the government announced
that private school fees would be charged VAT at the standard 20% rate from 1 January 2025.

The Chancellor Rachel Reeves confirmed the government’s plans to charge VAT on private school fees in her
Budget statement on 30 October 2024
. Legislation to this effect was included in the
Finance Act 2025
(specifically sections 47 to 49).

What has the impact of this measure been?

At the time of the Autumn 2024 Budget the government estimated that extending VAT to private school fees would raise
£0.46 billion in 2024/25, rising to £1.51 billion in 2025/26
. It also forecast that imposing VAT on fees would result in
37,000 pupils leaving the private sector, representing about 6% of the current private school population
. In its Economic and Fiscal Outlook published alongside the 2025 Budget, the Office for Budget Responsibility noted that the projected yield from this measure had been revised up slightly by
an average of £40 million per year
, driven by the updated forecast for average earnings that is used to project fee growth.

HMRC has published guidance for schools on
whether they need to register for VAT
, and
how schools should charge and reclaim VAT on goods and services related to private school fees
.