1 in 9 HNWIs with children at private school planning to move them into state education following addition of VAT to school fees

New data from the 7th Saltus Wealth Index Report reveals four in ten children currently at private school could see their education disrupted due to increased cost of private school fees

One in nine (11%) high net worth (HNW) parents with children at private school could move them into state school this academic year, according to the latest Saltus Wealth Index Report.

UK wealth management firm, Saltus, surveyed 913 private school parents as part of a wider study of 2,000 people with assets of £250,000 or more and discovered that more than four in ten (42%) say their children’s education will be disrupted as a direct result of Labour’s decision to add VAT to private school fees.

Saltus first started tracking sentiment on this issue in the fifth edition of the report in December 2023, around the time Labour first pledged to make the change should they win the election. At that time, 21% of parents with children at private school said they could remove their child from private school if VAT were added to private school fees. By August 2024, after the election but before the VAT addition came into effect, this figure dropped to 13%. 

Now that the tax on fees has come into effect, one in nine (11%) HNW parents, having had the opportunity to review the impact of the fee rise on their finances, maintain that they could be forced to remove their child from the private school system, while a further third (31%) say their child’s education could be disrupted in some way as a direct result of this policy:

• 11% could remove their child from private school and into a state school
• 10% could be moved to a less expensive private school
• 10% could go from being boarding to day pupils at their existing school
• 7% of HNW parents say they could move abroad to send their children to private school
• 4% could home school their children

This means that, overall, 42% of privately educated children could see their education disrupted as a direct result of the addition of VAT. Fewer than half (48%) of HNW parents say the addition of VAT will have no impact and they will continue to send their child to private school, while 7% say they will have to call on the bank of mum and dad or friends and family for financial support.

Wider, longer term impacts of adding VAT to private school fees

The Saltus data also suggest that the decision to add VAT is having wider and potentially longer term implications than the immediate impacts being felt by those with children currently at private school. 

The report found that more than a quarter (28%) of all respondents are considering leaving the UK permanently and, of those, 15% cite the addition of VAT to private school fees as the reason why they are considering leaving. This suggests that HNWIs with grandchildren at private school, as well as those with pre-school aged children, and even couples yet to start a family, are making longer term decisions about where to live based on the addition of VAT to private school fees.  

Mike Stimpson, Partner at Saltus said: “The Labour Government’s decision to add VAT to private school fees has been contentious and that feeling is reflected in our research. Over the last three editions of the Saltus Wealth Index Report we have seen strong opposition to this policy from parents, many of whom are now struggling to afford to keep their children in their current schools.

“We can now see that the number who say they are likely to have to remove their child has remained significant since the policy was first introduced, and now that it has been enacted the data suggest these parents may well go ahead with pulling their children out.

“If this were to materialise, the impact on the Treasury’s estimates could be significant, with VAT receipts offset not only by those parents who could enrol their children in the state system but by those leaving private education for an alternative on which VAT is not payable, including moving abroad and home schooling, two options noted by 11% of HNW parents.

“We can even see that for 15% of the 28% of high net worth individuals who are considering leaving the UK permanently, it is the addition of VAT to private school fees that is their primary consideration. And while VAT is unlikely to be the only factor in such a big decision, when coupled with other factors such as those feeling the UK is no longer connected to the world post-Brexit and is not a good place to raise a family, the prospect of living elsewhere in the world can tick a number of boxes.

“For those parents who are worried about affordability, seeking financial advice is key. A financial adviser can help provide a clear view on the current shape of your finances and outline ways in which parents – and other family members if they want to support – can most effectively finance their school fees.”