The new Labour Government in the UK is wrestling with the issue of how to raise taxes to tackle the public finance crisis. During the election campaign, they kept tight-lipped about which taxes will be affected, but they confirmed plans to impose Value Added Tax (VAT) on independent school fees. This move could increase costs on parents by an average of £3,500 per child (approximately USD 4,500) for families already facing high tax burdens. For families with children in boarding schools, the hike could be double that amount.
For those at the top of the income ladder, the additional expense might seem insignificant. However, a large portion of parents in the ‘just about afford’ category will be hit hard by these added costs, many of whom would simply not be able to afford the increase, and may have to withdraw their children from independent schools.
Various studies have tried to estimate how many parents are likely to withdraw their children from independent schools due to the addition of this VAT.
A Baines Cutler study suggests 130,000 pupils could be withdrawn from the private system (25% of the total enrolment) and placed into the state system. The tax gains from the remaining body of parents paying independent school fees could be mostly lost in the cost of having to absorb all these new pupils into the state education system.
Having deeply researched parents who send children to fee-paying schools, my view is that the number likely to be withdrawn from private schools will be far less, but there will still be significant disruption to independent schools. The changes I predict are:
1. For parents who want to put their children through the independent school system, they will delay the decision for as long as they can. For example, if they find a good state school for primary years, they are likely to sit this out until they think an investment in private schooling will really pay off, such as in secondary years, or later for high school or sixth form. This will mean a faster loss of pupils for independent primary years, and since these tend to be smaller schools, we are likely to see more of these schools close or merge.
2. Parents in the ´just about afford´ group will seek to find the means to pay for school fees, even if this means remortgaging their homes. However, expect a reduction in spending in other areas, such as overseas holidays!
3. With the potential of the tax burden increasing for all middle-class families in the UK via a range of stealth taxes, some people (like me 24 years ago) will seek employment in lower tax environments in other countries and put their children through the international school system overseas.
4. Some parents will get creative, such as using online private schooling with fees paid offshore. This could happen in the sixth form years as children have developed a level of independence in their learning.
If I were forced to put a figure on it, I estimate around 50,000 fewer UK nationals in the independent school sector by 2029.
How should independent schools respond?
For the moment, I can provide advice for boarding schools, as they can supplement the limited pool of parents in the UK able to afford private school fees (plus VAT) with a global market of wealthy parents who look positively towards the UK for the best education for their child.
In our 2023 international school study, we found that nearly 19,000 parents in Singapore, Malaysia, and Thailand might be interested in sending their children to boarding schools in the UK.
Furthermore, a much larger market for students can be found in China. The UK enjoys a very strong brand reputation for education and the inherent advantage of learning the English language. The BVA BDRC survey also shows that while there is competition from the US and Australia, the UK is one of the most preferred destinations for university students. Boarding schools in the UK can provide a useful pathway to higher education in the country.
However, for UK boarding schools, the Asian market is vast and complex. It has to be approached from a geographical and cultural distance and faces market competition from around 500 boarding schools in the UK, many of which are also targeting the Asian market.
In 2025, BVA BDRC will be implementing a comprehensive study of the Asian source market for UK boarding schools to determine how best they can optimize their international marketing in Asia.
This article was first published in the Q3 2024 edition of Asia Research Media
UK independent schools could look to Asia to stem potential loss of students due to new tax on education
By Piers Lee, Director, BVA BDRC Asia
The new Labour Government in the UK is wrestling with the issue of how to raise taxes to tackle the public finance crisis. During the election campaign, they kept tight-lipped about which taxes will be affected, but they confirmed plans to impose Value Added Tax (VAT) on independent school fees. This move could increase costs on parents by an average of £3,500 per child (approximately USD 4,500) for families already facing high tax burdens. For families with children in boarding schools, the hike could be double that amount.
For those at the top of the income ladder, the additional expense might seem insignificant. However, a large portion of parents in the ‘just about afford’ category will be hit hard by these added costs, many of whom would simply not be able to afford the increase, and may have to withdraw their children from independent schools.
Various studies have tried to estimate how many parents are likely to withdraw their children from independent schools due to the addition of this VAT.
A Baines Cutler study suggests 130,000 pupils could be withdrawn from the private system (25% of the total enrolment) and placed into the state system. The tax gains from the remaining body of parents paying independent school fees could be mostly lost in the cost of having to absorb all these new pupils into the state education system.
Having deeply researched parents who send children to fee-paying schools, my view is that the number likely to be withdrawn from private schools will be far less, but there will still be significant disruption to independent schools. The changes I predict are:
1. For parents who want to put their children through the independent school system, they will delay the decision for as long as they can. For example, if they find a good state school for primary years, they are likely to sit this out until they think an investment in private schooling will really pay off, such as in secondary years, or later for high school or sixth form. This will mean a faster loss of pupils for independent primary years, and since these tend to be smaller schools, we are likely to see more of these schools close or merge.
2. Parents in the ´just about afford´ group will seek to find the means to pay for school fees, even if this means remortgaging their homes. However, expect a reduction in spending in other areas, such as overseas holidays!
3. With the potential of the tax burden increasing for all middle-class families in the UK via a range of stealth taxes, some people (like me 24 years ago) will seek employment in lower tax environments in other countries and put their children through the international school system overseas.
4. Some parents will get creative, such as using online private schooling with fees paid offshore. This could happen in the sixth form years as children have developed a level of independence in their learning.
If I were forced to put a figure on it, I estimate around 50,000 fewer UK nationals in the independent school sector by 2029.
How should independent schools respond?
For the moment, I can provide advice for boarding schools, as they can supplement the limited pool of parents in the UK able to afford private school fees (plus VAT) with a global market of wealthy parents who look positively towards the UK for the best education for their child.
In our 2023 international school study, we found that nearly 19,000 parents in Singapore, Malaysia, and Thailand might be interested in sending their children to boarding schools in the UK.
Furthermore, a much larger market for students can be found in China. The UK enjoys a very strong brand reputation for education and the inherent advantage of learning the English language. The BVA BDRC survey also shows that while there is competition from the US and Australia, the UK is one of the most preferred destinations for university students. Boarding schools in the UK can provide a useful pathway to higher education in the country.
However, for UK boarding schools, the Asian market is vast and complex. It has to be approached from a geographical and cultural distance and faces market competition from around 500 boarding schools in the UK, many of which are also targeting the Asian market.
In 2025, BVA BDRC will be implementing a comprehensive study of the Asian source market for UK boarding schools to determine how best they can optimize their international marketing in Asia.
This article was first published in the Q3 2024 edition of Asia Research Media
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