As of 1 January 2025, the UK government has implemented a 20% VAT charge on private school fees, a significant change that will impact many families. This policy aims to generate additional revenue to fund state school teacher recruitment, and improve standards generally.
It is also a possible reaction to questions from those who have challenged the previous charitable status of private schools so as to be exempt from VAT.
For families with children already in private education, this VAT increase means higher school fees, and therefore should be a consideration for separating families as well as those with pre-nuptial or post-nuptial agreements in place. The average cost of private school fees, which currently stands at around £15,000 annually, is expected to rise by approximately 10% due to the new tax. Whilst some schools are likely to absorb some of this additional cost, it is inevitable that some increase in fees will occur. This increase will add a substantial financial burden on families who have already committed to private education for their children. Some families may find it challenging to continue affording these fees, leading to difficult decisions about their children's education.
Impact on those currently going through financial and children proceedings
This change has several implications for separating families. Firstly, it may affect financial arrangements in divorce settlements where private school fees are a consideration. Parents may need to renegotiate terms to accommodate the increased costs. This could involve revisiting child support agreements or making adjustments to other financial commitments to ensure that the children's educational needs are met. Additionally, the higher fees could influence decisions about whether to continue private education or transition children to state schools.
Secondly, this shift could impact the dynamics of child arrangements, as parents may need to consider the logistics of new school locations, and the quality of education provided. If children are moved to state schools, parents will need to coordinate new routines and transportation arrangements, which could affect day to day schedules and agreements.
For those with existing financial agreements or child arrangements
Where financial agreements or orders are in place, it is common that the payment of private school fees will form part of the overall terms. This change in VAT treatment may make those fees unaffordable for the paying parent, however it is inadvisable to simply stop paying where to do so would be considered as a breach of the order. Instead, efforts should be made to agree a variation to the financial agreement or order, either directly with the other parent or through some means of non-court dispute resolution. This variation may be to move the child or children into State education, it may also be that other financial commitments (such as spousal maintenance or mortgage payments) are reduced to accommodate higher school fees. If an agreement is not possible then the court can hear an application to vary a financial order.
In circumstances where the court have determined the living arrangements for children and/or the time that they should spend with each parent, any change in school should also be carefully considered. The logistics of a change of school may in turn necessitate a change in child arrangements. Parents should however be cautious about making unilateral changes where that too could be considered as a breach of the existing order. If there is a dispute about where a child should attend school, then the court can determine that by way of a Specific Issue Order.
Impact on pre-nuptial and post-nuptial agreements
For those with pre-nuptial or post-nuptial agreements, the VAT increase on private school fees may necessitate a review of these documents. These agreements often include provisions for the payment of school fees, and the increased costs could affect the financial commitments outlined. Couples may need to renegotiate terms to ensure that the agreements remain fair and reflective of the new financial reality.
If your pre-nup or post-nup specifies a fixed amount for school fees, it may no longer be sufficient to cover the increased costs due to the VAT. In such cases, it is advisable to seek legal advice to review the agreement accordingly. Ensuring that both parties are aware of and agree to the changes can help prevent future disputes and ensure that the children's educational needs are adequately met.
It is therefore essential to review existing agreements and consider future educational expenses in light of the VAT increase. By staying informed and proactive, families can better manage the impact on their children's education and overall financial planning.
Sean Hilton
Sophie Imber