VAT on School Fees: FAQs

Since the General Election, the Chancellor has reiterated the Government’s policy to introduce a 20% VAT charge on all Independent school fees, effective from January 2025. Despite some language used by politicians and the media, this is a tax on the consumer rather than the institution. Therefore, it must be fully applied to all school fees. Any mitigation measures enacted by schools can only relieve the overall burden but cannot reduce or eliminate the VAT charged to parents.

Additionally, the Government has announced that business rates reliefs granted to Independent schools with charitable status will be removed from April 2025. This change will impose a new direct cost on Independent schools. Independent schools in Scotland have already faced this change since 2021 under the devolved Scottish Assembly.

The Government claims that these measures in England will generate over £1.6 billion in additional funds for the state education sector. However, these figures are disputed by sector representative organisations such as the Independent Schools Council.

The Government has announced implementation dates: January 2025 for the VAT imposition and April 2025 for the removal of business rates relief. While challenges to these timings are possible, it must be assumed that these dates will be adhered to.

A factor often overlooked in the media is that if VAT is applied to school fees, Independent schools will also be able to reclaim VAT on their own spending on external goods and services.

Based on our historic spending levels, the net impact of the VAT policy for us has been calculated as approximately 16% rather than 20%.

Although the financial implications are significant, our school has a robust financial track record and solid financial position, enabling us to absorb some of the impact of the VAT imposition on our parents.

We intend to use the school’s financial resources to help parents manage the VAT imposition over several years through a graduated annual fee (Fee+VAT) increase program. This approach will minimise the short-term impact, allowing parents to plan confidently for their child’s education at KES and KES Prep.

By adopting sensible cost mitigation plans and leveraging the school’s solid financial position, we believe we can protect parents from some of the overall impact of the VAT imposition, although a portion of the 16% net increase will inevitably be passed on to parents over time. Our current intention is that ultimately parents will bear 10% of the additional VAT burden, with the school permanently absorbing the remainder. However, this will be dependent upon achieving operational efficiencies and sustaining strong pupil numbers across the school.

For the mid-year VAT imposition starting January 2025, we will pass on 4% of the additional 16% burden to parents for the Spring and Summer terms of the 2024-2025 academic year. The remainder of the additional cost, amounting to approximately £1.7m, will be absorbed by the school. Parents will understand that this magnitude of cost to the school cannot be sustained over the longer term. Please note, supplies of goods and services that are closely related to education will remain exempt from VAT. For example, catering and stationery. Transport will remain zero-rated. 

Therefore, a further portion of the VAT impact will be passed on to parents for the 2025/26 academic year. We anticipate the full extent of the VAT imposition to be reflected in the 2026/27 academic year fees.

We will continue to incur normal annual inflationary pressures that will also be reflected in the usual April annual fee communication.

It is crucial that we continue delivering an exceptional educational experience and maintain appropriate investment in our school for the benefit of current and future students. Our planning is designed to preserve this level of investment while ensuring parents’ money is wisely spent, always considering the needs of our pupils.

The mechanism for the phased and partial introduction of VAT on school fees will be communicated in November, following the Autumn Budget on 30 October. We must ensure our invoice presentation complies with indirect tax regulations. Regardless, we will ensure that the additional burden for parents is as communicated (e.g., 4% from January 2025 until September 2025). This means that although VAT must be applied at 20% to our bills when this policy is introduced and will appear as a separate line item on billing documents at that time, the fee will be adjusted to ensure the total termly invoice amount is only 4% more than the published September 2024 fee.

While our planning for the VAT imposition is well-advanced and has been rigorously scrutinised and approved by our Governing Board, we may need to amend our plans in response to changes in circumstances. We will always update parents promptly on any required changes.

As part of our planning, we are exploring opportunities to increase non-fee income for our school, utilising our assets at KES main site, KES Prep, Wellington, and Lovaton to generate additional income during off-peak times. These funds will be reinvested in your child’s education and help counterbalance the costs of these new VAT and Business Rates policies.

We will continue to seek and implement sensible and measured cost savings where they do not impact the quality of our educational offer. This ongoing duty to use your fee income wisely does not mean decreasing investment in our educational priorities but evolving our provision to match the needs and aspirations of your children, reflecting our ethos and values as the leading co-educational day school in our region.

Our school has always been at the forefront of educational excellence in Hampshire, providing outstanding academic experiences alongside unmatched co-curricular opportunities and pastoral care. We are proud of our pupils' achievements and the enabling environment we provide, a tradition we have maintained for nearly 500 years.

We have demonstrated resilience, creativity, and flexibility in managing our school, particularly during the COVID-19 pandemic, earning numerous accolades from our parent and pupil community. Our response to the pandemic highlights our ability to progress and improve even when facing challenges. We will continue to innovate, build, and enhance the experience for every child at KES Prep and King Edward’s.

We remain grateful to our parent community for your trust and ongoing commitment to a KES and KES Prep education for your child.

We strive to keep parents well-informed about their child’s school through various means, including the weekly Bulletin, which will continue to provide timely communications. Additionally, we have set up this dedicated page on our website where parents can find responses to frequently asked questions about the impact of proposed Government policies.

We will also write directly to our parents and prospective parents whenever external circumstances change and at key points in the implementation of our mitigation strategy. By these means, we aim to keep our community well-informed about the challenges we face and our responses.

We believe we have a duty of care to our current and prospective pupils and parents. We want you to commit to KES Prep and KES with the confidence that you will continue to see value for money in our educational offering. We believe the lifelong benefits of a KES Prep and KES education are immense, and we want you to remain with us until your child completes their education at the age of 18, having enjoyed the full range of experiences our schools offer.

Therefore, we aim to manage the impact of the VAT imposition on school fees carefully, ensuring you can continue to enjoy these benefits and opportunities. All our planning is designed to achieve this while allowing us to invest in your child’s education as you would hope and expect.