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Will VAT on private schools push families to downsize their homes?

Journalist: Melissa Lawford, The Telegraph

ended 13. July 2024

Are people talking about moving house because of the incoming policy to charge VAT on private school fees (eg are they downsizing to smaller properties)? What measures are families taking to reduce their costs when school fees go up?

10 responses from the Newspage community

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Ben Perks
Managing Director at Orchard Financial Advisers
The Government clearly have a huge misconception around who uses Private schooling. It’s not just the aristocracy, working families that have chosen to prioritise their children’s education will be hit hard by the addition of VAT. For some, they will absolutely downsize their home in order to provide their children with the opportunity of a better future.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
The introduction of VAT on private school fees is fundamentally wrong and misguided. This policy unfairly targets parents who prioritise education, often making significant sacrifices to give their children the best start in life. Contrary to the perception that it affects only the wealthy, many who choose private education are ordinary individuals working hard in regular jobs. With the 20% VAT hike looming, families are considering drastic measures such as downsizing homes, moving to less expensive areas, or remortgaging properties to manage the increased costs. We must question why hardworking and successful individuals are continually targeted for increased taxation. Such policies undermine fairness and penalise those striving to improve their children's futures through education and should be exempt from such taxes. VAT on private school fees is not just a financial issue; it is a matter of principle. Labour must rethink this policy and consider its broader implications.
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Andrew Montlake
Managing Director at Coreco
We have not seen any evidence that this will mean anyone will downsize and the whole issue seems to be a bit of a myth.
Whilst there are undoubtedly many families who have pushed themselves to allow their children to go to Private School, many will also not find it an issue. I suspect that the reality will be more of an easing of school fees that have shot up too far over recent years and have room to be eased so as not to over burden their students families.
I suspect Private schools can swallow these increases and whilst some families may walk away, I think this will proove to be a storm in a teacup.
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Kate Allen
Owner at Finest Stays
For a select few of our Owners with holiday homes in Salcombe, maximising bookings to boost their secondary income is essential. Whether it's to cover a Cheltenham education or an increased mortgage, the impact of VAT on school fees cannot be ignored.

And before playing the world's smallest violin for these Owners, remember that their second-home rentals fuel a thriving tourism economy, vital for coastal towns.
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Scott Gallacher
Director at Rowley Turton
The introduction of VAT on school fees is a concern for many of our clients. However, downsizing to cover these costs hasn't been a consideration anyone has raised yet. While people highly value private education, I doubt many would be willing to downsize to help cover the expenses. In my experience, downsizing creates its own set of problems, as many people end up spending money trying to match the standards of the home they have downsized from. Additionally, the costs of moving—such as stamp duty, legal fees, estate agents, removals, etc.—shouldn't be underestimated, and you may end up realising less than you originally anticipated.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
The families I speak to are very worried. Most are not what you'd call 'rich' and can only just about afford the fees as it is. Many are planning to either re-mortgage or borrow to plug the gap - with higher rates this is very concerning and will naturally impact their retirement plans and broader finances.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
The people who are going to suffer are the middle class who are stretching themselves as much as possible to put their children through private school. An extra 20% cost on this is simply going to make it unaffordable to these families. People will make savings where they can, but the end result is likely to be moving their children to public schools which then puts more pressure on the already struggling public school system.
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Nick Harris
Co-founder at Quarters
Buyers are certainly wary of this but are watching to see how this manifests; will the schools pass the full 20% on, will they absorb it, will be a hybrid? Schools will no doubt treat this in differnet ways with some seeing seeing opportunities and others threats as any business would (presumably depending on the size oif their surplass and their growth plans). There's no doubt it'll have a knock on effect on property prices with the premium growing for homes in Good and Outstanding catchments.
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Kasia Makarewicz
Senior Mortgage Adviser at Step by Step
Yes, there is considerable discussion among families - and I am one of these parents as well - about moving house due to the impending policy to charge VAT on private school fees. The additional cost is prompting families to reassess their financial strategies, leading some to consider downsizing to smaller properties to free up funds. Others are looking into relocating to areas with top-performing state schools to avoid private school fees altogether. The policy is influencing housing decisions and causing families to explore various ways to manage the financial impact.
In my opinion, families will be tightening their budgets, cutting discretionary spending, and prioritizing essential expenses to accommodate the higher school fees. Some families will explore ways to boost their income, such as taking on extra work, starting side businesses, or seeking higher-paying job opportunities. Some of them will be seeking scholarships, bursaries, and financial aid from private schools.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
There are a lot of moving parts when it comes to this particular question, the first being: will fees rise by the full 20%? Or will some schools choose to absorb some of the rise themselves? Although I haven't had any direct conversations with borrowers actively looking at housing in the context of school fees, it is a possibility that someone may choose their child's education over their own housing preference, either to have a smaller mortgage commitment or to release equity to use towards the increase. Another consideration is those who choose to remove their children from private education; will we see families moving house to get within the catchment area of the top State schools? Maybe creating pockets of above average price rises and market activity?