If you’re a parent with children in private school, you’re likely already juggling the high cost of education. Now, with VAT on school fees set to be introduced from 1st January 2025, things are about to get even more expensive. In this post, we’ll break down what this means for you, particularly if you run your own business, and how you can prepare to handle the added financial strain.
The Impact of VAT on Private School Fees
Private school fees are already high, ranging from around £12,000 to £15,000 per year per child outside of London. In areas like Surrey, fees can be as high as £31,000 per year. When VAT at 20% is added to this from 2025, these costs will climb significantly.
For example, a £31,000 annual fee would increase by £6,200, bringing the total to £37,200 per child, per year. If you have more than one child, this can quickly become a huge financial commitment. Even for business owners with higher-than-average incomes, this additional cost could be a serious burden.
How Can Business Owners Prepare?
As a business owner, you have more financial flexibility than most, and this can work to your advantage. With careful planning, you can offset the impact of these higher school fees. Here’s how:
Factor VAT Into Your Budget
Start by updating your budget to account for the new VAT charge. If your school fees increase by £12,000 annually, you’ll need to make sure your business can generate the additional income. Take a close look at your cash flow and profit margins—where can you tighten up?
Increase Profitability
The simplest way to deal with rising costs is to increase your revenue. Look for opportunities to grow your business over the next year to cover this added expense. Can you expand your services, raise prices, or tap into new markets? Remember, to cover an extra £12,000 in fees after tax, your business turnover may need to grow by £20,000 or more.
Maximise Tax Savings
Have you reviewed your tax situation recently? There are many legitimate ways to reduce your tax bill, and those savings could help offset the higher school fees. My book, 70+ Ways to Pay Less Tax, is a great place to start. By ensuring you’re making full use of available tax breaks, you could save thousands each year—enough to help cover the VAT on school fees.
The Bigger Picture: Don’t Just React—Thrive!
It’s easy to feel defeated by the idea of an extra £12,000 or more in VAT. But remember, as a business owner, you have the tools to turn this challenge into an opportunity. By focusing on increasing profitability and managing your finances effectively, you can ensure your children get the education you want for them without feeling the pinch.
