UK Introduces Private School Tax Reform to Inject £1.5 Billion into Public Education

The UK Labour government has announced a significant reform to private school taxation, set to generate over £1.5 billion for public education annually. Starting January 1, private schools will lose their tax exemption and be required to pay 20% Value Added Tax (VAT) on tuition fees. The funds will be allocated to hiring 6,500 new teachers and enhancing standards in state schools, where 94% of UK children are educated.

Announcing the policy, Finance Minister Rachel Reeves declared, “It’s time things are done differently,” emphasizing the need for equitable access to high-quality education. Education Secretary Bridget Phillipson echoed this sentiment, stating that rising education standards “cannot just be for families who can afford them.”

The Labour Party, which secured a landslide victory in the July elections, outlined this reform in its October budget as part of its pledge to address educational inequality. The policy is projected to raise £1.5 billion for the 2025-2026 school year, increasing to £1.7 billion annually by 2029-2030.

Private school tuition fees, which currently average £18,000 annually according to the Independent Schools Council, are expected to rise by approximately 10% as institutions absorb part of the additional costs. Critics argue this could lead to a surge in state school enrollments, placing a financial burden on the government. However, the Institute for Fiscal Studies and other research centers have refuted this claim, citing projected population declines that will reduce state school enrollments by 2030.

The Labour government views this reform as a crucial step toward reducing the educational disparity exacerbated during 14 years of Conservative rule, aiming to ensure that public resources are directed toward the majority of the nation’s children.

Source: The Mint

Photo Credit: The Mint