VAT on private school fees was fully expected by the time the Government laid out its full plans alongside the Autumn Budget.
VAT will apply to school fees from January 2025 at the standard rate of 20 per cent, placing a heavy financial burden on families – with the potential for significant complications for separated parents with school fee arrangements.
How are fees managed?
Depending on the needs of the child, their standard of living and the financial means of both parents, divorced parents can arrange to continue paying school fees if their child is at an independent school.
This can either be done by mutual agreement or via a School Fees Order through the Courts.
They can be reviewed if costs change substantially, which they may be set to do under current proposals.
How will VAT changes impact orders?
For those with existing school fee court orders, rising costs may make private schooling less viable, particularly as inflation and now VAT adds pressure on family finances.
This could lead to court applications to vary existing orders – a costly and time-consuming process which may require parents to weigh the costs to vary an existing order versus the higher school fee costs.
For children with special educational needs (SEN), the stakes are even higher. While the Government has exempted VAT on local authority-funded SEN placements, privately funded placements will see added costs, potentially limiting options for children needing specialised support.
The wider implications
Newly separated parents negotiating school fees will also need to future-proof their arrangements, factoring in VAT as well as inflation.
This could shift the focus to state schooling or ‘top slicing’ a capital fund to cover private education costs.
However, for many, the added VAT might render private education financially unviable, requiring tough decisions on educational stability and continuity.
This may also result in greater conflict and the need for dispute resolution, such as mediation or adjudication.
This VAT shift underscores the importance of practical, forward-thinking arrangements for school fees in family court orders, especially where SEN needs are involved.
Families need to stay informed and be ready to adapt, exploring all options from non-court dispute resolution to potential variations in existing orders.
Contact our Family Law team to discuss education costs and financial agreements after separation or divorce.
