- Author
- Arslan Mohsin, ACA
- Published
- Reading time
- 2 min read
From January 2025, education services and vocational training supplied by private schools in the UK are subject to VAT at the standard rate, together with closely related boarding services. The change affects household budgets, school pricing decisions and school accounting systems at the same time.
What Has Changed?
Previously, education supplied by an eligible body was exempt from VAT. Private school fees now fall outside that exemption, which means schools must register for VAT where they exceed the registration threshold, charge VAT on fees, and account for it to HMRC in the normal way.
What It Means for Parents
- Fee invoices now include VAT at the standard rate, so the amount payable will rise unless the school absorbs part of the cost.
- Prepayments made in advance of the change are subject to anti-forestalling rules and may still attract VAT.
- Bursaries, discounts and scholarship arrangements can change the VAT-inclusive amount payable, check exactly what the school's fee schedule now states.
- Some closely related supplies, such as school meals, transport and books, may follow different VAT treatment.
What It Means for Schools
- Register for VAT where the registration threshold is exceeded, and put the correct tax point treatment in place for fee billing cycles.
- Review recovery of input VAT, including on capital projects, and consider whether the capital goods scheme applies.
- Apply partial exemption methodology where the school continues to make exempt supplies such as certain nursery provision.
- Update finance systems, fee schedules, parent communications and contracts to show VAT clearly.
| Area | Before the change | After the change |
|---|---|---|
| Tuition fees | Exempt from VAT | Standard-rated |
| Boarding fees | Exempt as closely related | Standard-rated |
| Input VAT recovery | Largely blocked | Recoverable on taxable activities |
| Fee invoices | No VAT shown | VAT shown separately |
Tuition fees
- Before the change
- Exempt from VAT
- After the change
- Standard-rated
Boarding fees
- Before the change
- Exempt as closely related
- After the change
- Standard-rated
Input VAT recovery
- Before the change
- Largely blocked
- After the change
- Recoverable on taxable activities
Fee invoices
- Before the change
- No VAT shown
- After the change
- VAT shown separately
Timing matters
The tax point rules and anti-forestalling provisions mean the date a fee is invoiced or paid can determine whether VAT applies. Review payment plans carefully.
Frequently Asked Questions
Yes. Because fees are now taxable, schools can generally recover input VAT attributable to those taxable supplies, subject to partial exemption and the capital goods scheme.
Specific provisions apply where a placement is funded by a local authority. Schools and parents should confirm the treatment for each funded place.
Yes. VAT is a UK-wide tax, so schools in Scotland are affected in the same way as the rest of the UK.
Need clarity on the VAT position?
We advise schools on registration, partial exemption and recovery, and help families understand the real cost of fees after VAT.
Disclaimer
This post provides general information about VAT on private school fees in Scotland and the UK. Specific requirements may vary based on your individual or organisational circumstances. Always consult with a qualified accountant or advisor, like Stratton Financial Limited, before taking any action or making financial decisions related to VAT.
