Why is VAT being added to private school fees?
Getty ImagesVAT is now being added to private school fees after new rules came into force on 1 January.
The government plans to spend the money raised on more teachers for state schools in England.
But a legal challenge to the policy has been taken to the High Court, with some families and schools claiming it is discriminatory and in breach of human rights laws.
What is VAT and when was it added to private school fees?
Value added tax (VAT) is one of the government's main sources of income. It is payable on top of the purchase price of many goods or services and the standard rate is 20%.
Previously, private schools did not have to charge VAT on their fees because of an exemption for organisations providing education.
Private school fees are liable for 20% VAT from 1 January.
About half of England's private schools are also charities, so receive an 80% reduction on business rates (taxes on properties used for commercial purposes).
Separate legislation will be introduced to remove this tax relief, but plans to remove private schools' charitable status have been dropped.
Why was the VAT policy challenged in court?
The legal challenge was brought by three groups: the Independent Schools Council (ISC), which represents more than 1,400 private schools, a smaller group of Christian faith schools, and the parent-led group Education not Discrimination.
They argued that the policy goes against the legal right to an education.
They also claim the policy is discriminatory, as those families attending low-paying faith schools, or with children with special educational needs and disabilities (Send) who do not have an education, health and care plan (EHCP), say their needs "cannot be adequately met in the state sector".
But the government said the main objective of the VAT policy is to raise additional tax revenue so they can raise standards for the 94% of children who attend state schools.
Their lawyers argued that those who wish to opt out of "the system of universally accessible, state-funded education" are free to choose any private education for their child that they can afford, or to educate their child at home.
If the legal challenge is successful, the government could consider whether it would amend the policy, but it would be under no obligation to do so.
How will the extra money be spent?
The removal of the VAT exemption is UK-wide, but each nation will decide how to spend the additional money received.
The government estimates that the policy will raise an extra £460m in 2024/25, rising to £1.7bn by 2029/30.
Chancellor Rachel Reeves said "every single penny" will go to state schools.
Labour has repeatedly pledged to use the money to recruit 6,500 new teachers for state schools in England.
Schools have been struggling to attract and retain qualified teachers for years, especially in subject areas like maths and science.
In October's Budget, the government allocated different sources of funding to address other issues in schools, like crumbling buildings and a stretched system for pupils with special educational needs.
How much do private schools cost?
Private schools - sometimes called independent schools - charge fees for most students.
While some famous schools, like Eton and Harrow, charge about £50,000 a year, the average is about £15,000.
There are about 2,500 private schools in the UK, educating about 7% of all pupils, including about 570,000 in England.
Private schools have more freedom than government-funded state schools, and do not have to follow the national curriculum.
Some local authorities pay for children with special educational needs and disabilities (Send) to attend private schools.
Will private school fees go up for everyone?
Applying VAT does not necessarily mean fees will go up by 20%. Some private schools may decide to put up their fees more than others.
On average, the government expects fees to increase by around 10%.
The average cost of private school fees has risen by 55% since 2003, even without VAT, the Institute for Fiscal Studies (IFS) think tanks says.
However, the proportion of children being privately educated over the period has not fallen.
Children with Send that have a local authority EHCP, which names the specific school that can meet their needs, are exempt from the VAT policy.
The government says a grant to help cover boarding school fees for children of military families has also been increased to take account of rising charges.
What could the tax change mean for state schools?
The government does not expect a significant impact on the number of pupils attending private schools.
It estimates that around 37,000 students will move to the state sector over the long term, but believes class sizes will not increase.
It points to research by the IFS which says it would be possible for the state sector to "easily accommodate extra pupils" because overall student numbers are set to fall by 700,000 by 2030.
That drop is larger than the total number of children currently attending private schools.
However, pupil numbers are not falling by the same amount everywhere, so some individual state schools could face pressure on class sizes.
The ISC says some of its members reported a 4.6% fall in Year 7 pupils in September 2024.
It believes the government has underestimated the level of pupil displacement that will be caused.