Parents tap pensions as VAT on private school fees drives up costs
A new VAT charge on private education has triggered fee hikes, leaving a quarter of families dipping into savings and pensions.
The UK government introduced value‑added tax on private school tuition in April 2025, ending a decades‑long exemption. The change forced most independent schools to raise fees by as much as one‑fifth to protect margins.
Fee surge hits family budgets
According to a recent study by Rathbones, the extra cost is already reshaping household finances. Nearly 25% of families with children at independent schools have taken cash from Individual Savings Accounts or other long‑term investments, while one in five have cut back on pension contributions. More than a third report scaling back holiday plans, and 29% say they have postponed home‑improvement projects.
"As families prepare for a new school year, many are finding that the true cost of private education extends far beyond the school fees themselves," said Amanda Cook, Rathbones financial planning director.
Schools feel the squeeze
Prestigious institutions such as Eton College and Tonbridge School now charge north of £60,000 a year, more than 50% above the UK median salary. The pressure has already led to closures; at least 77 schools, including historic names like Longacre School and Thetford Grammar, have shut their doors since the VAT came into force. Private‑school enrolment has fallen by roughly 30,000 pupils, a decline of over seven per cent.
What lies ahead
Families facing tighter budgets are likely to reconsider private education, delaying enrolment or switching to state schools. The financial strain could spur political debate over the VAT policy, with industry groups warning of further closures if the tax remains. Schools may seek cost‑saving measures, including mergers or expanded scholarship programmes, to retain pupils.
