Labour Tax Reforms Put Independent Schools Under Pressure
Author: Priya Maya Kumari, Director of Patronage
Something has changed. Quietly at first, then all at once. Across the UK, bursars, governors and heads of independent schools are confronting what may well be the most destabilising shift to the sector in a generation. Since January, a 20% VAT has been applied to school fees. From April, the longstanding 80% business rates relief has been stripped from charitable-status schools. The financial architecture that once propped up Britain’s independent schools is being dismantled piece by piece.
The consequences are already visible. In the last academic year alone, more than 11,000 children have left the independent sector, nearly four times the number the government originally forecast. Average day fees have surged by more than 22%, putting even mid-range day schools out of reach for many middle-income families. Some now face annual costs of £22,000 or more. For boarding schools, fees regularly exceed £60,000 per year. These are not marginal adjustments. They are figures with the power to reconfigure school communities entirely.
For many parents, the mood is one of betrayal. A choice they once saw as a long-term investment in their child's education now feels uncertain, even precarious. Letters have gone out quietly from bursars explaining new surcharges. Governors are fielding calls from furious families unable to absorb the rise. And for those already giving to school fundraising efforts, there is mounting frustration that their donations are being eclipsed by basic operational costs.
Independent schools are caught between pressures. Inflation, rising staff costs, pension obligations and increased regulation were already squeezing margins. Now, they are being forced to respond to political pressures without the cushion of generous tax treatment. The impact is most acute among smaller prep schools and SEND-specialist institutions, many of which lack the historic endowments or high-fee buffers that shield their larger counterparts.
Among the families withdrawing are a growing number of ‘HENRYs’, high earners, not rich yet. These are the doctors, lawyers, and second-generation entrepreneurs who once formed the backbone of independent school enrolment. Families who have worked hard, saved, and prioritised education above all else. For them, VAT is not a modest adjustment, but a breaking point. With the average day school bill now surpassing £22,000, and in many cases tipping over £50,000 once tax and surcharges are applied, many are simply opting out.
What emerges in their place is a narrower pool of privilege. The families unaffected by these changes are those with longstanding wealth, individuals for whom school fees are absorbed as part of intergenerational planning, not active sacrifice. This shift has consequences beyond the financial. If the independent sector becomes the preserve of inherited capital alone, what happens to the concept of education as a lever of opportunity? Who gains entry to elite networks? Who is excluded, and at what cost?
Historically, private schools have offered a mixed cohort, children of state-educated parents, immigrant families, professionals who rose through the ranks and chose to invest in education as a route to upward mobility. If that diversity falls away, so too does the argument that these schools reflect a broad cross-section of talent. As the pool shrinks, so do the futures it shapes. And so, inevitably, does the pipeline into top universities, leadership roles, and boardrooms. The long-term impact on social mobility and sectoral diversity should not be underestimated.
This is precisely where strategic fundraising ought to step in. But here, too, schools face barriers. The traditional approach – polite annual appeals, auctions, parent drinks and an overworked development officer – will no longer suffice. To survive, many schools must rethink what fundraising means.
Fundraising is no longer a quiet sideline. It is core to institutional resilience. Yet as parents tighten belts and donors recalibrate priorities, schools must become far more sophisticated in the way they ask, the way they explain, and the way they plan. There is no room for vague language or abstract gestures that do little to clarify intent. Stakeholders want clarity, commitment and credible financial thinking. Schools must now define with precision: what does this gift enable? Who benefits? What values underpin the case for support?
Voltaire is actively exploring opportunities to support schools facing these challenges, drawing on experience across philanthropy, strategic planning and governance. Our approach focuses on discreet, bespoke advisory work that strengthens long-term financial resilience. Voltaire is poised to help schools shape capital campaigns that do more than raise funds. They rebuild trust with stakeholders. Voltaire intends to assist in developing bursary programmes that parents and donors believe in, because they understand exactly how those funds are allocated. We can offer governance training for trustees who find themselves increasingly asked to steward not only policy, but patronage, and are currently exploring the best frameworks and partnerships to support this work effectively.
Philanthropy in the school context must evolve. Not every family can give, but every family deserves to know their concerns are heard. Schools that open up about their financial reality, their strategic priorities and their moral commitments are more likely to retain the loyalty of the families who built them.
Labour’s introduction of VAT and the removal of business rates relief has triggered these seismic shifts, but what follows depends on how institutions respond. While Keir Starmer has stopped short of revoking charitable status, his government has made clear that private schools should not enjoy tax privileges without accountability. In his words, “there is no evidence schools will be forced to close.” Whether or not that is true, it reveals a broader political mood: independent schools are expected to justify their place.
There is no single solution to the financial pressures facing the independent sector. But it must be acknowledged that these institutions are not just fee-charging schools for the wealthy. They are registered charities with a mandate to serve the public good. That means not only delivering academic excellence, but driving positive social impact.
Recent data shows the divergence clearly: average fees have risen steadily year on year, while total enrolment has begun to fall, with 2024 marking the sharpest drop yet.
Declining enrolment, growing operating costs, and donor fatigue jeopardise this mandate. The fundraising model that once quietly underwrote scholarships, music departments, SEND provision and essential capital works is no longer sufficient. Left unaddressed, these pressures risk narrowing access, reducing social mobility, and ultimately limiting the role independent schools play in building a fairer society.
This is not a future any serious institution should be willing to accept. The graph is already clear: fees are rising steadily, enrolment is declining, and the middle ground is disappearing. What happens next is a matter of strategy, governance and courage.
Voltaire exists precisely for this moment. We work alongside school leaders, trustees and donors to design thoughtful, tax-efficient philanthropic strategies that protect long-term access and strengthen institutional legitimacy. The support we offer is discreet but decisive. For those now facing impossible questions about their financial model, their identity, and their future, Voltaire can help to answer them.
Sources
Department for Education: 11,000 fewer private school pupils in England – https://www.independent.co.uk/news/education/education-news/private-school-vat-fees-pupils-b2764343.html
House of Commons Library Briefing: VAT on independent schools from Jan 2025; business rates relief removed April 2025 – https://commonslibrary.parliament.uk/research-briefings/cbp-10125/
UK Government forecast vs. real pupil drop – https://researchbriefings.files.parliament.uk/documents/CBP-10125/CBP-10125.pdf
The Times: average day school fees increased by 22% to over £22,000; boarding fees exceed £60,000 – https://www.thetimes.co.uk/article/extra-75k-pay-private-school-fees-768lxlh27
Financial Times: fee rise, enrolment drops, donor pressure – https://www.ft.com/content/ecefe39b-f0df-4547-b4b1-4d86f0f77d05
Financial Times, Jonathan Guthrie on HENRYs and private sector shifts – https://www.ft.com/content/be7ef463-ed5f-4662-abc3-631902b376d9
Sky News: Keir Starmer on VAT and no closures expected – https://news.sky.com/story/sir-keir-starmer-says-there-is-no-evidence-private-schools-will-have-to-close-due-to-labours-plans-13160025
Charles Russell Speechlys: VAT legality upheld – https://www.charlesrussellspeechlys.com/en/insights/expert-insights/dispute-resolution/2025/tuition-tussle-unveiling-the-vat-verdict-in-the-private-school-fees-showdown-in-the-case-of-alr-and-others-v-chancellor-of-the-exchequer-case/
Reuters: Labour policy projected to reduce private school attendance and fund 6,500 state teachers – https://www.reuters.com/world/uk/labours-move-tax-private-education-leaves-britain-divided-2024-09-30/
Institute for Fiscal Studies (IFS): impact of VAT and school fee inflation on middle-income families – https://ifs.org.uk/articles/private-school-fees-have-grown-twice-fast-state-school-spending-last-decade
TES: VAT policy implications for SEND provision and school diversity – https://www.tes.com/magazine/analysis/general/vat-on-private-school-fees-everything-you-need-know
Sutton Trust: Elitist Britain 2023 – educational background of UK leaders – https://www.suttontrust.com/our-research/elitist-britain-2023/