12/07/2025
Revealed: the full, devastating impact of Labour’s VAT raid on private schools
Pieter Snepvangers
12 July 2025 6:00am BST
School children being erased by a pencil rubber as private schools close and pupils are displaced
Money Reporter
Last summer Sir Keir Starmer made two promises to schoolchildren.
The first was a father’s promise that his son’s education would not be disrupted if he became prime minister. The second was a commitment to levy 20pc VAT on private school fees “as soon as it can be done” if Labour won the general election.
He kept both promises. But while one child was able to complete their schooling unaffected by the new Labour Government, for thousands of private school children it has been a different story.
At least 44 private schools have announced their closure as a result of the VAT raid, disrupting the education of almost 6,000 children. Many have entered the state sector, eroding the revenue the Government hopes to raise. All have had their lives upended as a result of Labour’s education tax.
Six months on since the policy was formally introduced on January 1, critics say all of their worst fears have become reality.
Plans to hire 6,500 new state school teachers with the revenue raised from the levy have been watered down. School fees appear to have risen higher than Treasury officials expected, leading to a greater exodus of pupils into the state sector. All of this has raised doubts about whether the policy will really raise the promised £1.7bn by 2030.
As head teachers and parents come to the end of the first school year where VAT has been applied to fees, Telegraph Money has assessed the impact of the tax raid so far.
Exodus of 16,000 pupils
Labour ministers have remained resolute that the VAT levy would not lead to an exodus of private school pupils into the state sector. The Treasury’s impact assessment in October 2024 forecast 3,000 pupils would leave across the school year, but this prediction seems to have been a gross underestimate.
Last month, the Department for Education revealed that private school pupil numbers fell by more than 11,000 in England following Labour’s VAT raid on fees. The comparison looked at overall pupil numbers in January compared with the same point last year.
The net exodus of 11,000 pupils – equivalent to one in 50 pupils – masks the true severity because of a slight increase in pupils joining specialist schools. In mainstream independent schools, around 16,000 pupils left.
If these pupils were paying average day school fees of £22,146 a year, it equates to a £70m loss in revenue for the Treasury. This estimate would grow significantly if those same pupils joined state schools, which cost the Government around £8,000 a year per child in funding.
Tim Barrow, 42, a small business owner from Hertfordshire, is one parent who has decided to remove two of his children from private schools as a result of the VAT raid.
Tim Barrow and wife Carly with their three children
Tim Barrow and his wife, Carly, have had to move their two sons to the local primary school, taking places other families would need
He says: “All this policy has done is target middle-income families, those who have made considerable sacrifices to provide the best education for their children. Those who, frankly, have no margin left to play with.
“And in our situation, it has resulted in two additional places at our local primary school now occupied by my boys. It didn’t need to happen. Two other families have lost access to those places and the Government receives no additional tax revenue for my two children.”
At least 44 schools close their doors
Across the country, private schools have been forced to close as a result of the levy, with many also citing the rises in National Insurance and minimum wage in April as contributing factors.
The Telegraph has identified 44 schools that have closed or are set to close as a result of the VAT levy. Dozens more have closed in the past six months but these schools have not attributed their closures to the tax policy.
Closures have predominantly taken place at schools charging lower fees, where parents are more price sensitive. St Joseph’s Preparatory School, a Catholic school in Stoke-on-Trent that charged £10,245 per year, was forced to close on December 31.
Its former headmistress Roisin Maguire said the policy has priced out “working class” families from private education. She says: “I’d love to have taken Bridget Phillipson into St Joseph’s and said this is a school with one of the lowest fees, these parents are the people who work extra shifts at the hospital in order to afford this because their child has high needs.
“[Ms Phillipson] has in her mind Eton and Harrow when she thinks of independent schools, but that’s not the picture on the ground of schools who are affected by this.”
Shut schools, displaced children and lost communities are immediate results of a damaging policy
