The impact of the VAT charge on school fees for separating families

From January 2025, a new VAT charge on private school fees could create significant financial and logistical challenges for separated or separating parents. The standard 20% VAT rate will be added to private school fees from 1 January 2025. Any fees paid from 29 July 2024 relating to the term starting in January 2025 and onwards will be subject to VAT.

With this additional cost, families may need to adjust financial arrangements or school fee orders to keep children’s education plans on track while managing their budgets effectively. In cases where parents disagree over private vs. state schooling or other school choices, the new VAT charge may also influence child arrangements, prompting the need for clear legal guidance.

In this article, family lawyer Gianna Lisiecki-Cunane explains how the VAT changes could impact a family’s finances and what separating or separated families need to consider.

School fee orders

School fee orders form part of overall financial arrangements between the separated parties, and they are usually ordered if private schooling was part of a child’s life prior to separation, or if both parties agree it should continue. When making a school fees order the court would have looked at the financial capabilities of both parties, aiming to ensure that their child’s educational needs can be met without undue hardship on either parent.

Child arrangements orders govern where a child lives, spends time and other practical aspects of care, but they are also relevant when deciding on school fees if education is a point of dispute. Whilst school fees orders are typically financial matters, they are inextricably linked with child arrangements if the question of where a child will go to school is central to child arrangements.

In both situations, the court places the child’s welfare at the forefront, seeking to preserve stability in the child’s education and to reduce potential disputes over financial responsibility for schooling costs.

The impact of VAT changes on family finances

The charge of VAT may mean that existing school fee arrangements or child arrangements require revisiting, as the new VAT cost can strain budgets or complicate agreed-upon commitments in separated or divorced parents’ settlements.

To manage and prepare for this change, parents should:

1. Review current school fee orders: this can be done with a family solicitor who will assist with examining existing agreements to understand how VAT may impact your arrangements and explore solutions that mitigate financial strain. The school fee order may need amending if the financial circumstances of the paying parent have significantly changed or enforced if not paid. The application to vary should always be made before payment default, as it then becomes a breach.
2. Negotiating practical adjustments: if amendments are needed, parents will need to agree on a balanced, practical solution that prioritises their child’s educational stability. This may mean considering a state school for the child and looking at when is a suitable time for that to occur. If it is not possible for the parents to agree, any application may be needed for a specific issue order or if there is already a child arrangements order or specific issue order in place, that may need amending to specify a different school.
3. Clarity and future planning of the child’s education needs: taking your child out of school is typically a last resort for parents and so, to avoid this, looking at other financial expenditure and whether cutbacks can be made in other areas long term may be necessary.

The new VAT on school fees is an important shift, but with careful planning, families can manage these changes without compromising their goals. It is important that parents understand the options available whilst protecting their financial stability and ensuring the best outcome for their child.

If you have questions or concerns about how the VAT change could impact your family, please contact Gianna Lisiecki-Cunane.