VAT on private school fees: Legal challenge dismissed - what it could mean for families

• Private schools have had to pay VAT on the fees they charge parents since January, after a policy change
• A legal challenge was launched on behalf of families and schools
• High Court judges have now dismissed this challenge
• A legal expert says while some families have left private schooling as a result of rising fees, others have found ways to cover the extra cost

Private schools and families that fear being priced out of them have suffered a ‘huge disappointment’ - but those hanging on are finding ways to manage.

From the start of 2025, private schools were no longer exempt from paying the standard 20% VAT (value added tax) on the fees they charge. The Government described the policy change last year as closing a tax loophole for private schools, with the extra money to go towards improving the state schools that educate about 94% of UK students.

The move saw a legal challenge launched on behalf of families with children attending independent schools. Many said this would lead to fee increases that could see them no longer able to afford a private education, with the Independent Schools Council (ISC) arguing it could breach human rights and discrimination laws.

This week in the High Court, judges published their ruling on the case. But what exactly was the outcome, and what will it mean for parents of state and private school pupils? Here’s what you need to know:

What happened in court?

The legal challenge came from families, some of whom were represented by the ISC. It was based on the premise that the new policy was discriminatory, and a breach of some children’s human rights - including their right to an education.

On Friday (June 13), three high court judges dismissed the legal challenge. In their full judgment, they said that the policy which added VAT to private school fees was “made by Parliament, in primary legislation, after full debate and was a manifesto commitment”, the BBC reports.

They found that the Government knew that some families would no longer be able to afford private school fees, including those with children attending independent faith schools, single-sex schools, or schools for children with special educational needs or disabilities (SEND). Parents belonging to all three groups were among those which brought the legal claims against the policy.

But the judges said that it was “entitled to consider these factors to be outweighed by the expected revenue raised for public services”. Although they found the policy did interfere with some of the group’s human rights, there was a “broad margin of discretion in deciding how to balance the interests of those adversely affected by the policy against the interests of others who may gain from public provision funded by the money it will raise”.

The policy change, however, likely would not have been possible under EU law - or without Brexit, according to The Guardian. “This is therefore one respect in which the UK’s exit from the EU has increased the scope of parliament’s freedom to determine policy.”

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What will it mean for schools and families?

For private schools, this ruling most likely means that the VAT charged on school fees since January 1 this year will remain in effect. Many schools have raised their fees in response to the new policy, sometimes by thousands of pounds, which risked pricing some families out.

For parents of pupils enrolled in an independent school that has opted to raise fees to cover the new tax, this will probably mean they remain at these higher rates. Law expert Nick Mendoza, a partner at law firm Wedlake Bell, said that the data has already shown that private school numbers have fallen across England in response.

But other families had found ways to manage, he continued. “While there will likely be an appeal, most parents and schools will already have found ways to adapt to the increase in fees. Some parents may have turned to grandparents to help ease the cost and grandparents can use the opportunity to help fund school fees as part of an overall long-term, tax-efficient succession plan. Parents may also want to consider education trusts, which can be used to provide funds for school fees and take advantage of specific inheritance tax exemptions.”

In a press statement after the court decision, the ISC vowed to continue supporting families and schools. Chief executive Julie Robinson said: “We would like to thank the claimants who shared their stories on key issues: SEND, faith schools, bilingual provision and girls-only education. It showcased how vital independent schools are for many families and the broad, diverse community choosing what they feel is the right education for their child.

"The ISC is carefully considering the court’s judgment and next steps,” she continued. “Our focus remains on supporting schools, families and children. We will continue to work to ensure the government is held to account over the negative impact this tax on education is having across independent and state schools.”

While independent school leaders have described the decision as a “huge disappointment”, for parents of children at state-funded schools, it may come as good news. The Government told the BBC that it welcomed the judgment, with a spokesperson adding that the policy would raise as much as £1.8 billion a year to support pupils in state schools.

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