The Government is imposing 20% VAT on private school fees from January 2025, as part of a commitment to raise £1.5 billion for state schools.
The private sector previously enjoyed charitable status that exempted them for value added tax (VAT). As such, families with at least one child in or about to enter independent education should now consider financial planning options to factor in increased costs. If you are tax planning in Cheshire and this affects you, check out our guide to private school fee taxation.
How will this affect my family?
For some parents, the sheer additional expense – potentially thousands of pounds a year – may mean there is no choice other than to look for alternative schools within the state sector. For others staying private, there are practical tips available that might benefit you and your family.
There are various savings and investment options to weigh up. Determining whether to go for a simple savings account or a more complex investment vehicle will better help you understand your financial objectives and child’s future interests.
With a new account set up for a child you should be aware of its taxable status, who has access and when. Moreover, research the account’s growth potential and the personal tax and inheritance tax implications of a donation or gift structure. Be mindful of which accounts a child can access at 18. These are a Savings Account, NS&I Premium Bonds, Junior ISA, and Bare Trust, but not a General Investment Account or Discretionary Trust. It can help to speak to a financial adviser when looking ahead.
