Parents beat Labour's VAT on fees raid by paying £500m up front
Hundreds of millions of pounds in fees were paid upfront last year to avoid the 20 per cent VAT, which came into effect on January 1, analysis by the Daily Telegraph shows.
Britain's top 50 independent schools received £515 million in advance fees last year, up from £121 million in 2023, according to research of the latest annual accounts at Companies House and the Charity Commission.
• More than fifty UK private schools shut since Labour put VAT on fees
By handing over school fees before Labour's deadline, wealthy parents may have avoided up to £103 million in VAT, with that sum expected to be even higher when taking into account all of the UK's 2,600 private schools.
Parents at some schools tried paying up to five years' fees before the January deadline to dodge Labour's tax, the analysis shows.
The large scale of advance payments could impact Labour's plan to raise revenue, tax experts have warned.
However, the Treasury says that the Office for Budget Responsibility considered the use of prepayment schemes when making its forecasts for how much money would be raised by the VAT raid.
Fees gathered from prepayment schemes, which are used to pay for one or more years of a pupil's education in advance, have risen across the UK's most expensive schools, including Brighton College, which recorded £50.1 million in total prepaid fees last year — an increase of £4.1 million from 2023.
Only 86 of its pupils were covered by the school's prepayment scheme last year. That figure jumped to 819 last year as parents scrambled to beat the VAT deadline.
Eton College collected £52.7 million in advance fee payments last year, up £16.6 million from 2023.
At Winchester College, fees collected in advance rose from £4.4 million in 2023 to £19 million in 2024.
Labour maintains that its tax raid is aimed at targeting Britain's wealthiest families and will raise more than £1.8 billion a year for state schools in ten years.
However, with wealthy parents forking out large sums to Britain's most prestigious schools, it is the smaller private schools that are likely to be affected the most.
The government predicts that 100 schools could shut over the next three years, with more than 50 independent schools already announcing their closures as a result of the policy, the Telegraph reports.
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