Some parents prefer to have their children privately educated. Indeed, we’re spoilt for choice in the Rutland area, with Oakham, Stamford, Uppingham and Oundle schools all on our doorstep and other good public schools not that much further away.
And, if you send, or are thinking of sending, your children to a private school, you cannot have missed the government’s decision to put VAT on school fees.
In this article we look at the implications of this change and how it may affect you if you and your partner are splitting up or have already separated or divorced.
What’s changing?
The UK has approximately 2,600 private schools. Some of these are ‘for-profit’ schools, whereas others are ‘charitable’ and therefore not for profit. Both types have always been exempted from VAT, with the 1,300 schools with charitable status not having to pay corporation tax, capital gains tax or stamp duty.
As of January 1 2025, VAT at a rate of 20% will be added to private schools’ education and boarding fees, regardless of whether they are charitable or ‘for profit’ schools. The government’s stated aim is to improve standards and opportunities for children in state schools, with the estimated £1.7bn per year raised from VAT going to fund public services, including education.
As well as paying VAT, private schools that are charities will lose charitable business rate relief (an 80% discount on the rates they pay on their buildings) as from April 2025.
These changes will result in higher school fees.
How will this affect parents?
Most schools will pass on the full VAT rise to parents, who will understandably not want to see their child’s education disrupted. Parents have consistently absorbed similar increases over the past 20 years, and it’s expected that they will do so this time.
The rise will affect everyone with a child at private school but could have particular implications for those with parents who are separating or divorcing.
A 20% hike in fees is a significant increase, leading to speculation that some parents won’t be able to meet it and may have to move their children to state schools.
Research by the Institute for Fiscal Studies (IFS) shows that private school fees have increased by 20% in real terms since 2010 and by 55% since 2003. That means most private school fees have gone up by between 3% and 8% anyway, with the most sought after schools seeing the largest rises. So, while a 20% increase is not something to simply be dismissed, school fees have already risen markedly year on year. Despite this, the rate of privately educated children has not fallen over the last two decades.
Approach of the courts
VAT on school fees could be an issue for you if you’ve separated in the following situations:
- You already have a court order in place with a provision for school fees.
- You are in the process of negotiating a financial settlement that includes the payment of school fees.
- You are planning on sending your children to a private school in the future.
This increase might mean one parent feeling that private school fees are no longer sustainable and are either looking to reduce their contribution to them or to take the child out of private education.
The argument for continuing to pay school fees
The court has the power to make an order that school fees must be paid by one or both parents. It can also change (what lawyers refer to as ‘varying’) an existing order to either increase or decrease who pays what towards them.
One argument in support of not changing a private schooling arrangement despite the VAT addition, is that school fees are increasing year on year anyway. While a 20% hike in one year is a big jump, they will continue to go up.
A further argument comes from case law. In Court of Appeal case of Tracey v Tracey, the Judge refused to end a school fees order even though the father – who was paying the school fees – had financial difficulties and a multiple sclerosis diagnosis.
While this is a not a new case, it illustrates that the courts will be reluctant to change where a child goes to school. Aware that school fees increase annually anyway, they are likely to avoid the drastic step of taking a child out of their school unless private education really is unaffordable.
The argument against paying school fees
The courts will not always favour private education, however. If the children are already at private school, that’s one thing – but if they’re not yet enrolled there, then the situation might be quite different.
For any application to the court for children to be privately educated and payment to be ordered by the other parent, it will usually need to be shown that both parents had agreed that their child should attend public school.
This is supported by the recent 2023 case of De Renée v Galbraith-Marten. Here, the mother took the couple’s daughter out of an ‘excellent’ state school, with the view to her being privately educated and the father picking up the bill.
However, the Judge said given that there had been no plan or agreement between the two about private education for their daughter – and that the father’s other children had not gone to public school – forcing the father to pay school fees would be ‘a gross injustice’.
So, just because one parent can potentially afford school fees, it doesn’t automatically follow that a Judge would rule that they should pay for the child’s education if the paying parent is against it.
Unmarried couples
Payment of school fees after separation of course doesn’t just apply to children whose parents were married.
It can equally apply to unmarried couples who separate. This is clearly apparent in the recent case of Manchester City and England footballer Kyle Walker. Although he and his ex-partner, social media influencer Lauryn Goodman, were not married, the court still had the power to order one parent to pay the school fees.
So, while Lauryn Goodman didn’t get an astro-turf pitch installed at her house or a new Mercedes GLE every three years, she did get an order that Kyle Walker pay for their children’s education.
How we can help
As specialist family law solicitors, we have the experience and knowledge you’re looking for.
We can provide you with tailored advice about how VAT on school fees could impact any agreement you may currently have or any other issues on paying for private education when parents break up. Submit your details here, and we’ll arrange a free, no-obligation callback at a time to suit you.
A short history of charitable status
If you’re interested in the history that preceded the Government’s VAT increase for private schools, here some context around the momentous decision:
- AD 597 – Britain’s oldest public school, The King’s School in Canterbury, was founded.
- 1532 - Stamford School established
- 1556 – Oundle School established
- 1584 – Oakham School established
- 1584 – Uppingham School established
These schools, along with many others established around the same time, were founded as the result of charitable bequests, with the aim of providing an education for the poor.
For example, the statutes for Oakham School state that: "The schoolmaster shall teach all those grammar scholars that are brought up in Oakham, freely without pay, if their parents be poor and not able to pay and keep them constantly to school.”
- 1601 Charitable Uses Act. This established the first formal definition of charitable activity. For any institution to be recognised as a charity, it ‘must exist for the benefit of the public’ and ‘must be exclusively charitable.’ This included ‘schools of learning,’ ‘free schools and schools in universities’ and ‘the education and preferment of orphans.’
- 1818. There were concerns that the charitable schools were failing to provide education to the poor but were instead focused on educating the wealthiest. As such, a report was commissioned entitled The Education of the Lower Orders in the Metropolis and beyond. The report found an ‘almost universal abuse of the free grammar schools, which the masters generally regard as a perfect sinecure. Good houses, gardens and glebe lands, and often ample salaries, are enjoyed by masters who teach no free scholars.’
- 1853. By this time most schools came under the scope of the Charity Commission with a view to reform.
- 1861. The Clarendon Commission was established following complaints about the finances, buildings, and management of the nine ‘Clarendon’ Schools. The report was supportive of the schools which were granted complete independence to run their own affairs and be exempt from tax. In an opinion very much of its time, the report concluded that: ‘It is not easy to estimate the degree in which the English people are indebted to these schools for the qualities on which they pique themselves most – for their capacity to govern others and control themselves, their aptitude for combining freedom with order, their public spirit, their vigour and manliness of character, their strong but not slavish respect for public opinion, their love of healthy sports and exercise.’
- Over time the Clarendon nine have become 1,300 independent schools with charitable status.
- 1973. VAT introduced.
Private schools’ not being liable for VAT is relatively new, given that the tax itself is only just over 50 years old. Their charitable status and tax exemption generally have been in place for a long time – although the reasons why the schools were established has changed markedly over the years.
