Source: Adam Smith Institute
by Madsen Pirie
“The UK government’s imposition of VAT on schools will raise less money than they calculated, and might well cost them money. Private schools now charge VAT at 20% on fees, and the government collects that revenue. On paper, this looks like a straightforward tax windfall. But several offsetting effects erode or potentially reverse the gain. Families who can no longer afford fees pushed up by 20% are withdrawing their children and placing them in state schools, which the government must fund. Estimates run as high as one in ten leaving private education. Each additional state school pupil costs roughly £7,000-£8,000 per year. If enough pupils switch, this spending can outweigh VAT receipts. Private schools, now VAT-registered, can reclaim VAT on their own purchases such as building work, supplies, etc., something they couldn’t do before. This reduces the net VAT take.” (05/11/26)