Four in 10 parents said their children’s education will be disrupted as a result of the Government’s decision to add VAT to private school fees, according to UK management firm Saltus’ latest Wealth Index Report.
In the lead-up to the general election last year, Rachel Reeves said that, if the Labour Party won the election, its plans to add VAT to private school fees would be shelved until 2025.
In December 2023 – around the time Labour first announced an intention to add VAT if they won the election – over a fifth (21%) of parents said they could take their child out of private school if VAT was added to the fees. However, by August 2024, this number had dropped to 13%.
For its newest findings, Saltus surveyed over 900 parents of privately educated children as part of a wider study of 2,000 people with assets of £250,000 or above. Alongside those parents considering removing their children from private school altogether, 10% said their children could be moved to a less expensive private school, 10% said their children could move from being boarded to being day pupils at their existing school, and 7% could even move abroad to send their children to private school.
In addition, 4% said they could home-school their children.
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The addition of VAT could affect under half (42%) of privately educated children, according to the study. The proportion of high-net-worth parents who said the change will have no impact on their children attending private school was 48%.
Meanwhile, 7% of those surveyed said they will have to turn to family and friends or the Bank of Mum and Dad for financial help.
Impact ‘could be significant’
The Government’s decision to add VAT to private school fees may have longer-term and more expansive implications than the immediate effects, Saltus’ survey found.
Almost a third (28%) of respondents were considering leaving the UK permanently. Of those, 15% cited the change as the reason for considering leaving. This suggests that the addition of VAT is also influencing the decisions of high-net-worth individuals with grandchildren in private education, preschool-aged children or who have not yet started a family.
Mike Stimpson, partner at Saltus, said: “The Labour Government’s decision to add VAT to private school fees has been contentious and that feeling is reflected in our research. Over the last three editions of the Saltus Wealth Index Report, we have seen strong opposition to this policy from parents, many of whom are now struggling to afford to keep their children in their current schools.
“We can now see that the number who say they are likely to have to remove their child has remained significant since the policy was first introduced, and now that it has been enacted, the data suggest these parents may well go ahead with pulling their children out.
“If this were to materialise, the impact on the Treasury’s estimates could be significant, with VAT receipts offset not only by those parents who could enrol their children in the state system, but by those leaving private education for an alternative on which VAT is not payable, including moving abroad and home schooling – two options noted by 11% of HNW parents.”
He added: “We can even see that for 15% of the 28% of high-net-worth individuals who are considering leaving the UK permanently, it is the addition of VAT to private school fees that is their primary consideration. And while VAT is unlikely to be the only factor in such a big decision, when coupled with other factors such as those feeling the UK is no longer connected to the world post-Brexit and is not a good place to raise a family, the prospect of living elsewhere in the world can tick a number of boxes.
“For those parents who are worried about affordability, seeking financial advice is key. A financial adviser can help provide a clear view on the current shape of your finances and outline ways in which parents – and other family members if they want to support – can most effectively finance their school fees.”
