Are Schools Closing Because of the Private School VAT Change?

Since the private school VAT change, effective 1 January 2025, private school tuition and boarding in the UK have been subject to 20% VAT, and from 1 April 2025 most charitable schools in England lost business rates relief.

This has shifted the question from “will fees rise?” to “can even larger schools cope?” Pressure is evident across the independent school sector. Pupil numbers in England fell between January 2025 and January 2026, and several schools were removed from the register in 2024. At the same time, new schools continued to open in 2025 and 2026, showing that the sector is both being squeezed and reshaped simultaneously.

How Schools Are Affected by the Private School VAT Change 

Change	When It Applied	Why It Matters
VAT on private school education and boarding	1 January 2025	Core tuition and boarding fees are now standard-rated
Prepayments caught	Payments from 29 July 2024 for terms starting on or after 1 Jan 2025	Paying early did not always avoid VAT
Loss of charitable business rates relief (England)	1 April 2025	Many schools lost the 80% mandatory discount unless an exception applied

The business rates change is significant because charitable relief had previously reduced bills by 80%. Schools focused on pupils with EHCPs generally keep this relief.

A key point is that 20% VAT does not automatically mean fees rise by 20%. Schools can reclaim input VAT, leaving an average net VAT cost of about 15% of fee income. Average fee rises of around 10%, though some schools absorb more costs and others pass on more to parents.

Read: Everything About HMRC v Colchester Institute VAT Dispute 

Why Larger Schools Are Now Affected

The pressure isn’t just about one tax. In England, there are 2,474 private schools, of which 1,127 are charities. Around 1,024 of these schools lost charitable rates relief.

• Average extra business-rates cost: £308 per pupil in 2025/26
• For schools with over 1,000 pupils, per-pupil increase: £288
• Total cash impact for large schools: £374,000 per school

Even though smaller schools face higher per-pupil increases, large schools still face significant total costs, especially with staffing, estates, and borrowing commitments.

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Most schools will not immediately close. They may first:

• Use reserves
• Cut non-essential spending
• Raise fees

Financial pressure can build over time before a school reaches a breaking point.

Are Larger Private Schools Actually Closing?

Yes, closures are happening, but context matters. 

• 58 independent school closures in England in 2024
• 85 closures in 2023
• 63 closures in 2022

This includes voluntary closures and regulatory removals. VAT alone cannot be blamed. The impact of VAT is difficult to predict in terms of how many additional closures will result.

Since 2000, England averages 74 closures and 83 new openings per year, showing a natural turnover.

Larger schools are under more financial pressure, pupil numbers are down, and some bigger schools are no longer shielded from challenges previously felt mostly by smaller schools.

What Schools and Parents Should Check

Practical steps matter more than headlines.

• Check fee packaging: Bundled tuition may have one VAT treatment, while extras like meals or transport may be separate.
• Understand exemptions: Nursery classes made up almost entirely of children under school age remain exempt. Care-based before- or after-school clubs can also stay VAT-exempt.
• SEND placements: VAT applies to the fee, but local authorities can reclaim it when funding an EHCP placement.
• Treat VAT recovery technically: Partial exemption and input VAT calculations are required for most schools.
• Use official tools: Services like “Get Information about Schools” let parents compare school finances and performance.
• Check registration fees: Application and registration fees are treated like normal tuition for VAT purposes.

Read: Getting Your Business Ready for the Summer’s Temporary VAT Cut 

How We Help Private Schools Deal With VAT

At Apex Accountants, we support independent schools with the practical side of VAT changes:

• VAT registration reviews and timing checks
• Partial exemption and input VAT recovery calculations
• Fee structure reviews for tuition, boarding, meals, clubs, and bursaries
• Cash-flow and budget modelling for VAT and business rates changes
• Support on restructuring, mergers, and orderly closure planning

Get Free Consultation

Call Anytime 0203 883 4777

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Conclusion

The biggest mistake is to reduce this story to a simple slogan. VAT and the loss of business rates relief have definitely increased pressure; pupil numbers in England’s independent sector have fallen for two consecutive years, and closures continue, but this does not isolate VAT as the sole cause and does not yet prove a clear wave of private-school closures in the UK. 

A more accurate headline would be this: larger private schools are no longer protected from the same financial pressures that have already hit smaller schools, but the official evidence still points to a sector in costly transition, not a one-line collapse story. 

FAQs on Private-School Closures in UK

When did VAT start on private school fees?

From 1 January 2025, with certain prepayments made from 29 July 2024 also caught if they related to terms starting on or after 1 January 2025. 

Does VAT on fees mean schools had to raise prices by the full 20%?

No. Official estimates point to an average fee rise of around 10%, not a flat 20%, because schools can reclaim input VAT on relevant costs. 

Is the business rates change a UK-wide policy?

No. VAT on fees applies across the UK, but the removal of charitable business rates relief applies in England. 

Are larger schools always hit harder than smaller ones?

Not necessarily on a per-pupil basis: in the matched cohort, schools with more than 1,000 pupils show a lower per-pupil rates increase than very small schools, but their cash increase per school is still large. 

Are nursery classes in private schools still exempt from VAT?

Yes, where they are wholly, or almost wholly, made up of children below compulsory school age. 

What about after-school clubs and holiday clubs?

Educational extracurricular activities are taxable, but childcare-based before- or after-school clubs and holiday clubs that consist of care are exempt. 

Can local authorities reclaim VAT on private school placements?

Yes, where the placement is funded by the local authority and the school is named in the pupil’s EHC plan, the local authority can reclaim the VAT through existing processes. 

Do bursaries remove the VAT charge?

Not usually. Where a separate bursary funds part of a specific child’s fee, VAT still applies to the full fee; only a school funding its own bursary to itself is outside scope. 

Are registration or application fees also caught?

Yes. Application and registration fees that must be paid for a pupil to attend are treated the same as normal school fees for VAT. 

Do official figures prove that VAT is already causing a wave of large private school closures?

No. Official closure data mixes voluntary closures with regulatory removals, and the policy impact note says it is difficult to assess how many extra closures the measure will cause.