The new Labour government’s policy of applying value-added tax (VAT) to private school tuition will come into effect in 2025, and it is already impacting tuition for the school year beginning this month.

The policy will end a long-standing VAT exemption that private school fee-payers have enjoyed. The Labour government has said that the increased revenue from the 20% VAT will help raise billions to bolster the state education sector.

Early estimates from the Labour Party suggested that the policy could raise as much as £1.7 billion a year, with £150 million in consequentials potentially coming to Scotland.

UK Labour has indicated the extra income would be ringfenced for state education, with a particular emphasis on teacher recruitment.

Billed as a policy meant to remove a perceived unfair exemption and bolster state education, the policy has met with some concerns since it was first announced. Parents from schools that don’t enjoy five-digit annual fees and international prestige have said the 20% rise in cost could price them out.

Although recent claims that council schools cannot handle an influx of pupils leaving the private sector have been debunked, the timing of the policy rollout—schools reopen in the next two weeks in most local authorities—does not leave parents or schools with much time to plan.

How will independent and state schools be affected?

A report from BiGGAR Economics, commissioned by the Scottish Council of Independent Schools (SCIS) and published in February, found that it would take a 13% decrease (3,190 pupils) in Scottish independent school enrolment to effectively cancel out the revenue gains from the VAT policy.

The SCIS said that families who can only marginally afford their current fees will be priced out of the independent sector and will need to move to state schools.

The actual impact on independent school enrolment has become a matter of debate. In July, Lib Dem MP Christine Jardine warned Prime Minister Keir Starmer that schools in Edinburgh were “fit to burst” and could not cope with a major influx of pupils whose families could no longer afford private school fees.

The council swiftly responded by saying that it has capacity for 12,700 more pupils in the city’s schools.

Regardless, the VAT change will likely significantly impact the capital. Roughly 25-30% of children in Edinburgh are privately educated, and some schools have already indicated that they will have to make adjustments for the new VAT policy.

Read more: Small religious school ‘on the brink’ as parents grapple with new VAT costs

George Watson’s College in Edinburgh, the largest private school in Scotland, told parents its fees will increase by 9% next year—from £15,951 to £17,388.

The BiGGAR report also estimated that the money raised by VAT would reach roughly £51 million in Scotland, less than the £100-£150 million suggested, which Scottish Labour leaders discussed when they spoke at the Educational Institute of Scotland’s election hustings in June.

SCIS also warned about the new fees' impact on children with additional support needs, a significant population in many smaller private schools.

“It’s predicted that around 6,000 pupils in Scotland will have their learning disrupted,” the SCIS said in a statement.

“Children who are in receipt of fee assistance will be most at risk of being forced out of independent schools.

“Their family’s income has already been rigorously means tested and assessed as at the limit of what they can afford therefore we know they cannot pay any more. Being forced to move school will be particularly detrimental to children with additional support needs.”

How are schools being impacted?

There have already been reports of schools in England where parents are concerned about their ability to afford the added costs. The January 2025 policy rollout has not left independent schools, families or state schools with much time to plan for how they will be affected.

This weekend, parents informed The Herald that a small religious school in Greenock could be forced to close if enough parents cannot afford the new costs. Either way, some families will be looking for new schools for their children to attend, with the school year less than two weeks away from beginning.