The impact of the removal of VAT exemption on private school fees in January 2025 is still being felt across the UK today says ASCL Independent Sector Specialist Neil Smith.

Private school fees

While the government projected increased revenue of £460 million for state schools in the 2024/25 financial year, rising to £l.7 billion by 2029/30 (tinyurl.com/589up3vu), the cost to independent schools has been steep.

This measure, introduced alongside the removal of business rate relief (already implemented in Scotland in 2022) and a rise in employer National Insurance contributions, was widely seen across the independent sector as punitive. School leaders warned of consequences well beyond their own gates, consequences that now appear to be playing out. 

Though pupils in the independent sector make up just 7% of the school-age population, these schools often serve as significant employers, community hubs, and partners to local state schools. Their contributions extend to teacher training, shared facilities, music and sports provision, and support for pupils with additional needs. Disruption within the sector therefore has a wider impact across education more broadly.

Mixed reactions, common concerns 

As anticipated, independent schools responded in different ways. Some were left with little choice but to pass the full 20% VAT cost on to parents, risking affordability and long-term retention. Others were able to shield families from the full impact, either by absorbing part of the cost or reclaiming VAT on recent capital investments, such as building works or infrastructure upgrades. 

Yet even the most proactive financial strategies could not entirely offset the anxiety among school leaders and governors. 

Would parents decide to move their children to the state sector, particularly at natural transition points like Reception, Year 7, or Year12? This concern was especially acute among smaller and rural schools, where market competition and limited catchment size leave little room for error. 

These fears have, in many cases, already been realised. Since January 2025, more than 50 independent schools have either closed or given notice of closure (tinyurl.com/p2rvmn3m). This figure has already surpassed early government estimates. In March, Torsten Bell, Parliamentary Secretary to the Treasury, suggested that approximately 100 schools might close over a three-year period. That number now appears conservative. 

Department for Education figures show a fall in pupil numbers in England's independent schools of 11,009 since the last academic year, well above the governments projection of 3,000 (tinyurl.com/5n8cvevy).The Independent Schools Council (ISC) puts the UK-wide decline even higher, at more than 13,000 pupils (tinyurl.com/2vudedy6).

Managing the fallout 

What does this mean in practical terms? For many schools, it means grappling with financial uncertainty while trying to maintain the high standards expected by fee-paying families. Cost-cutting measures - familiar to those in the state sector - have become a necessity. These include curriculum reviews, senior staff taking on broader responsibilities, and the restructuring of leadership teams. Some schools are even preparing for potential job losses. 

Meanwhile, long-standing pressures within the sector have been exacerbated. Since 2019, more than 400 schools have withdrawn from the Teachers' Pension Scheme, a trend driven by affordability concerns and now accelerated by additional taxation (tinyurl.com/33e48ett).

School mergers, which have been increasing in recent years, are becoming more common as a survival strategy. In particular, some boarding schools have sought to consolidate their future by acquiring feeder schools.

Shrewsbury School's recent merger with Terra Nova School in Cheshire is a prominent example. International expansion is another path being explored. Data from ISC Research (tinyurl.com/5f4ekthd) shows that 72 UK-branded overseas campuses are currently planned, part of a wider trend towards diversification of income sources. In some cases, UK charitable schools have formed partnerships with commercial education providers, operating hybrid models. Alleyn's School in London, for instance, has entered into a partnership with global schools group Cognita to operate schools both in the UK and abroad under the Alleyn's name.

The ripple effect on state education 

While the primary burden of VAT imposition is being felt within the independent sector, there are signs that the state sector is also starting to experience the impact. As pupils transfer from independent to state schools, local authorities may face increased pressure on class sizes, funding allocations, and staffing levels, particularly in areas where demand for places is already high. 

It's worth noting, too, that this shift comes at a time when the education system as a whole is facing demographic changes. A declining birth rate has already led to falling pupil numbers in primary schools, and this trend is expected to continue. Some local authorities have closed or amalgamated state primary schools due to falling rolls, meaning that the potential influx from independent schools may prove both a challenge and, in some cases, a partial solution.

A new era of collaboration? 

These financial and structural challenges offer an opportunity to rethink how different parts of the education system work together. Independent and state schools already collaborate in a variety of ways, from shared sixth form provision and professional development to community partnerships and support for vulnerable pupils. 

Now, as both sectors confront new and intensified pressures, there is scope for more strategic collaboration at leadership and governance level. Discussions concerning curriculum planning, staffing, budget management, and pupil support could all benefit from closer partnership, not as a matter of charity, but as a route to resilience.

Supporting school leaders 

At A SCL, we are acutely aware of the pressures facing our members in the independent sector. That's why we've undertaken a comprehensive survey of independent school members to capture the true extent of the challenges and to inform how we support schools going forward. You can see the results of the survey at www.ascl.org.uk/lndependentSurvey 

We understand that, for many leaders, the current landscape is deeply uncertain. However, there are tools and support systems in place. ASCLS professional development services, consultancy support, and hotline are available to assist schools as they adapt to this new reality (visit our website to find out more: www.ascl.org.uk). 

As we look ahead, one thing is clear: the effects of the VAT changes are far from over. But with adaptability, creative thinking, and cross-sector collaboration, there is a path forward, albeit one that will demand resilience and leadership in equal measure.

Since January 2025, more than 50 independent schools have either closed or given notice of closure. This figure has already surpassed early government estimates.

Neil Smith
ASCL Independent Sector Specialist
@smitne.bsky.social

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