VAT on private school fees – A growing crisis for independent educators

Since the introduction of VAT on private school fees in January 2025, around 54 independent schools have closed their doors and student numbers have dropped by 11,000 across the country. This signals a deepening crisis for the independent education sector, fuelled by the implementation of VAT on tuition fees, along with other notable tax changes.

In addition to the 20% VAT hike, the independent education sector suffered two more blows following the loss of charitable business rates relief and the rise in Employers’ National Insurance Contributions in April 2025.

In response to the tax hikes, private education providers pursued a range of avenues:

• Operational and financial restructuring to increase cost efficiencies
• School-wide cutbacks and spending reductions to reduce operating costs
• Absorbing a percentage of the tax hike with school profits and reserves
• Raising tuition fees for parents to absorb a percentage of the tax increase

According to the Independent Schools Council (ISC), private tuition fees increased by 22% following the introduction of VAT on private tuition fees. The rise in tuition fees was inevitable for institutions with minimal financial headroom, subsequently resulting in higher tuition fees for parents. Although this provides a solution to private schools, it prices out families already close to their financial limit, resulting in a drop in pupil numbers.

The latest annual census from the ISC found that the number of students across the board dropped by 11,000 since the VAT announcement, with traditionally high intake cohorts, such as Reception, Year 3 and Year 7 experiencing the largest drop.

The so-called ‘tax raid’ on British private education rocked the boat for parents and students alike, diverting former private school students to state-run schools. This resulted in private schools bidding farewell to one in ten students following the introduction of VAT on fees.

According to the Scottish Council of Independent Schools (SCIS), student numbers dropped by around 3,000 in Scotland since the VAT measure was introduced. The SCIS census found that there were 25,919 pupils in the current school year (2025), compared to 27,781 in the previous year.

Private educators must find innovative ways to keep fees affordable while maintaining high educational standards and protecting the financial integrity of institutions.

As the weight of VAT on private school fees bears down on the globally renowned industry, the financial decline of private schools must be kept under close watch as more institutions buckle under the weight of rising costs.

Beware of the risks of unregulated advisers – only licensed insolvency practitioners can handle
insolvency appointments and closure procedures from beginning to end. In contrast, unlicensed
insolvency advisers will pass your enquiry onto a third party and charge a premium for doing so.
Contact our licensed, specialist team today for FREE.

As a school leader, you carry important legal duties under charity and company law. Failure to act in the best interests of the school, especially in times of distress, can result in personal liability or reputational damage.

Key responsibilities include:

• Ensuring the school remains solvent
• Seeking advice from professional advisors at the earliest signs of trouble
• Keeping full records of decisions and justifications