VAT on Private School Fees Drives Mixed Outcomes

On 1 January 2025 the Labour government introduced a 20 percent VAT on private school fees and removed the 80 percent business-rates relief for charitable independent schools. The Treasury says the change will raise £1.8 billion a year by 2029/30 for state-school funding.

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Government data show 107 independent schools opened in 2025—the most since 2007—while 71 closed. In 2026, 38 have opened and 10 have closed. England now has 2,525 independent schools, including 529 special schools; 91 special schools opened in 2025, supporting 194,000 pupils. In 2023/24, 83 percent of state-funded special schools were full or over-capacity.

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A Treasury spokesperson said the VAT and loss of rates relief will “raise £1.8bn a year by 2029/30, making funding available to be reinvested in state schools.” The Independent Schools Council (ISC) reported that private-school fees were 22.6 percent higher in January 2026 than a year earlier, attributing the rise to the tax.

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Julie Robinson, ISC chief executive, warned that VAT, the loss of business-rates relief, higher pension costs, a rising minimum wage and operating expenses could push some schools beyond viability. Amanda Faye, headteacher of Thetford Grammar School, said the combined impact has placed “unsustainable pressure” on her school, prompting its closure.

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Parents in areas with limited state-funded special-school places are turning to independent schools despite higher fees. Since the levy, the South East saw 18 closures, London 15, Yorkshire and the Humber 10, and the East Midlands 10. The ISC noted a 22.6 percent average fee rise, increasing the financial burden on families.

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Overall school numbers have risen, yet regional closure patterns show localized strain. Data do not detail the financial health of schools that remain open, leaving uncertainty about long-term sector sustainability.

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• “While there is a combination of factors contributing to school closures, we know that there are some for whom the Government’s decision to tax education is a bridge too far.” — Julie Robinson, ISC chief executive

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• “Headteacher Amanda Faye told the BBC: “The cumulative impact of the 20 per cent VAT tariff on school fees, the removal of business rates relief, increased employer pension contributions and the rising of the minimum wage and operating costs has placed an unsustainable pressure on the school.” — Amanda Faye, Thetford Grammar headteacher

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• “8bn a year by 2029/30, making funding available to be reinvested in state schools.” — Treasury spokesperson

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• “6 per cent higher on average in January compared with a year ago.” — Independent Schools Council

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The ISC expects fees to keep rising as schools adapt to the tax regime, while the shortage of special-school places may sustain demand for independent provision. Ongoing monitoring of closures and financial health will be essential to gauge the policy’s longer-term impact.

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