The first full-term snapshot of the 20% value-added tax on private school fees shows a sharper contraction in the independent sector than the Treasury anticipated.
According to the Independent Schools Council (ISC), total pupil numbers across its member schools fell by 13,363 between September 2024 and January 2025 – a 2.45% decline to 538,215. The Treasury’s original estimate, published when the policy was announced last July, suggested only 3,000 pupils would move in the 2024/25 academic year.
Julie Robinson, Chief Executive of the ISC, said:
“Our data shows a significant decrease in pupil numbers… It risks raising absolutely nothing [in revenue] and yet the damage it is doing in terms of disrupting the education of children is already clear.”
Primary schools are bearing the brunt: ISC figures indicate a 3.5% fall in primary-age enrolment, compared with a 1.7% drop at secondary level. Analysts note that some parents are delaying entry to the sector until GCSE or sixth-form years, while others have withdrawn children altogether as household budgets come under pressure.
Fees rise by more than inflation
Most schools have passed the VAT straight through to parents. Average day-school fees rose 22.6% year-on-year in January, reaching £7,382 per term, up from £6,021. The headline figure comprises the 20% tax and a further 2.6% increase to cover cost inflation. Boarding and specialist schools report similar percentage uplifts, although the cash impact is higher given larger fee bases.
Last year, before VAT took effect, the average fee increase was 8%, broadly in line with consumer price inflation at the time fee decisions were set. The steeper rise means the effective annual cost for a typical day pupil is now around £22,000, pushing many middle-income families beyond affordability thresholds despite bursary support.
Revenue and capacity considerations
The Government maintains that VAT on school fees will bolster public finances and help fund state education. Its policy paper projects net receipts of about £1.8 billion a year by 2029/30 – sufficient, ministers argue, to recruit 6,500 additional teachers. Officials also contend that the state system can absorb the extra pupils; the Finance Act 2025’s impact note estimates a long-term transfer of 35,000 children, less than 0.5% of the state roll.
Independent sector representatives dispute both assumptions. They point to the much steeper early exodus and warn that continued attrition could erode the tax base, leaving little additional revenue once the cost of educating extra pupils is considered. The sector also highlights wider pressures, including the withdrawal of charitable business rates relief from April and higher employers’ National Insurance rates introduced last autumn.
Legal challenge in the High Court
In April, a three-day High Court hearing examined whether adding VAT to school fees breaches pupils’ rights to education under the Human Rights Act. The case, brought by a group of parents and supported by several schools, focuses on the mid-year implementation and the potential for discrimination against children with special educational needs. Judgment is expected later this summer; whatever the outcome, appeals are likely, meaning uncertainty may persist well into the next academic year.
Future outlook
Commentators will scrutinise next month’s ISC annual census for signs that the January snapshot is the start of a trend or a one-off adjustment. Much will hinge on whether schools can restrain cost growth and whether the pending court decision alters the policy landscape.
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