Parents at Britain’s top private schools have moved quickly to avoid Labour’s controversial VAT policy, paying hundreds of millions of pounds in fees upfront before the 20 per cent tax came into force on January 1, 2025.
Analysis by The Telegraph reveals that the most expensive independent schools received a staggering £515 million in advance fee payments last year, a sharp increase from £121 million in 2023. The rush to pay early has stunned tax experts and posed a headache for Labour’s revenue-raising plans.
Advance fee schemes allow parents to pay for one or more years of schooling before fees are due. With more than 2,600 private schools across the UK, the total amount paid in advance is expected to be significantly higher. It is estimated that the wealthiest parents alone may have avoided up to £103 million in VAT by paying ahead of the government-imposed deadline.
Priciest schools benefit the most
Among the biggest beneficiaries is Brighton College, the UK’s priciest private school, which saw prepaid fees jump from £4.1 million in 2023 to £50.1 million last year. The number of pupils covered by advance payments at Brighton rose from 86 to 819 over the same period.
Eton College also saw prepayments surge from £16.6 million in 2023 to £52.7 million last year. Winchester College reported a leap from £4.4 million to £19 million. Many parents have covered up to five years’ worth of fees, meaning they could avoid Labour’s tax entirely if a future Reform or Tory government cancels it.
The Treasury insists the Office for Budget Responsibility factored such prepayment schemes into its forecasts for VAT revenue. But experts warn that the vast sums involved could outstrip official predictions and spark legal battles if the Government tries to claw back money.
Labour confirmed its intention to charge VAT on private school fees in its election manifesto, sparking a rush by families and schools to act before the deadline. The Government was elected on July 4, but Chancellor Rachel Reeves only clarified on July 29 that all prepayments from that date would be subject to VAT.
‘It’s not surprising’
Mairéad Warren de Búrca, managing director at Alvarez and Marsal Tax, said: “It’s not surprising that schools would have done this type of thing with parents and maybe encouraged parents to jump on the prepayment bandwagon. Only the very rich can afford to make those advance payments, or those with extensive wealth … so I’m not entirely sure they [the Government] have managed to do what they intended to do.”
Labour maintains that its VAT policy will target Britain’s wealthiest families and raise over £1.8 billion a year for state schools by the end of the decade. However, smaller private schools warn they will be hardest hit, while elite institutions remain largely unaffected.
More than 50 independent schools have already closed or announced their closure since the VAT raid began, with government forecasts suggesting up to 100 could shut within three years as a direct result of the policy.