However, it was confirmed in the Budget that from 1 January 2025, all education services and vocational training supplied by a private school (or a “connected person” to the school) would be subject to VAT at the standard rate of 20%. Boarding services closely related to such a supply are now also subject to VAT at 20%.

It was on 29 July 2024, when Rachel Reeves delivered her first statement to the House of Commons, that the intention to review and change this was announced; therefore, schools were offering various ‘pay in advance’ schemes ahead of the October Budget to accelerate payments whilst the fees were still exempt.

However, it was clarified that any payments made after 29 July 2024 covering a term starting on or after 1 January 2025 would be subject to VAT. Where HMRC do look to assess VAT on fees already charged, we expect that many schools will have protected their position (within their terms and conditions) and will look to charge this cost to parents.

We would recommend anyone who has made advance payments to review their terms and conditions to confirm their position.

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