VAT on private school fees: the impact on divorcing couples

Currently, private school fees in the UK are exempt from VAT. However, this is expected to change under the new Labour government, which is proposing to end this exemption, meaning that private schools will be required to levy a tax of 20% on their fees. This will impact all families with children in private education and will be an additional financial pressure point on separating couples. The government have declined to confirm exactly when the VAT will be introduced, but the anticipated timeframe is September 2025.

For couples that are already separated, there is likely to be a Court Order in place which sets out who is responsible for the school fees. The paying party may now feel unable to afford the increase, putting them at risk of being in breach of the Court Order in the event they do not settle the fees in full. 

For couples that are separating, the additional cost will need to be taken into account in settlement discussions, increasing financial pressure on families as they transition from one household to two. For some households, the change may mean that private education is no longer affordable for their children and state options will need to be considered, impacting where they need to live in order to fall into the relevant catchment areas.

Where separating couples are in disagreement about how school fees will be funded moving forwards or whether their children can continue to be privately educated, it is advisable to start discussions early, certainly well in advance of the new rules expected to come in next year. This way, the family will be prepared and there is certainty for the children regarding their schooling arrangements.

In terms of options, parents are able to mutually agree a change to any Court Order in place. Where they are undecided on how to absorb the cost, mediation can be very effective in facilitating discussions and, where it is just not possible to agree, it is possible to make an application to Court to vary a Financial Order relating to school fees.      

If you are separated or considering separation and worried about how private school fees will be paid then please do not hesitate to get in touch with our Family Team to see how we might be able to assist you.