What does the pledge mean? 

Private schools (also known as independent schools) are schools which charge fees for pupils to attend, instead of being funded by the government. 

Value Added Tax (VAT) is a tax paid on most goods and services, the standard rate of which is 20%. Previously, private schools were among the eligible bodies that provided education and were exempt from VAT.

Ending the VAT exemption for private schools, as Labour’s manifesto pledged, means services offered by private schools are now charged VAT at 20%. 

About half of private schools in England have charitable status. Charities can claim up to 80% relief on business rates, a tax on non-domestic properties paid to local authorities (unless exempt). Some local authorities may pay the remaining amount on behalf of the charitable organisation. 

Business rates are devolved, and so we’ve assumed this element of the pledge applies to England only. Scotland removed the charitable business rates relief for ‘mainstream’ private schools on 1 April 2022, leaving it in place for special schools and certain music schools. In September 2024, the Welsh government announced a consultation on charitable non-domestic rates relief for private schools, and has proposed withdrawing the relief. 

By contrast, VAT is reserved, so changes made by the Labour government at Westminster would apply to all four UK nations. 

What progress has been made?

Looking at the two elements of this pledge together, it appears to be on track. On 1 January 2025, the rules around VAT and private schools were changed. While business rates changes have not yet been implemented, legislation to achieve this is currently progressing through Parliament.

After committing “to remove the exemption from Value Added Tax for private school fees” in the King’s Speech, on 29 July 2024 the government announced VAT at the standard rate of 20% would be applied to private school fees from 1 January 2025. It said the 20% rate will also apply to fees for terms starting on or after 1 January 2025 if the payment was made on or after 29 July 2024. 

The Finance Bill published following the Autumn Budget included provisions for the removal of the VAT exemption. While the Bill had not completed its passage through Parliament by the start of 2025, a Budget resolution on private school fees was agreed in the Commons on 6 November 2024.

Budget resolutions refer to specific proposals for changes to taxation. Votes on these take place before the Finance Bill as a whole is passed, which allows some resolutions to have “immediate legal effect”. However, legislative changes made this way are provisional, whereas the Finance Bill is permanent. The Treasury confirmed to Full Fact that the policy took legal effect via this Budget resolution.

The government has said local authorities will be able to reclaim VAT for pupils with special educational needs whose needs can only be met in private schools, and whose places are funded by local authorities. 

On business rates, the government said in a technical note in July 2024 that “the decision has been made to remove the business rates relief that private schools benefit from”, and that primary legislation would be brought forward after the Budget “to amend the Local Government Finance Act 1988 to end relief eligibility for private schools intended to take effect from April 2025”. The government reaffirmed this in its Autumn Budget. 

Legislation containing this measure was published on 13 November 2024, but as of January 2025 it had not yet passed into law. 

It’s also worth noting that the government has said some private schools in England may retain their charitable relief if they are “wholly or mainly concerned with the provision of education to children with an Education, Health and Care Plan”.