Ahead of the primary school application deadline this week (15 January 2025) which could see parents faced with increased competition for school places in popular catchment areas, Pepper Money found that 15% of parents that have children in private school will now opt for state school as a result of the VAT exemption coming to an end.
Parents that are looking to keep children in private school are having to consider extreme financial measures including:
- One in seven parents (15%) say Labour’s decision to scrap the current VAT exemption will now stop them sending their child to private school altogether
- Of these parents, 47% said this was purely a financial decision, admitting that ‘the increased cost makes private school unaffordable’
- More than a fifth (23%) of parents who plan to keep their children in private school plan on using credit cards to cover the cost of the additional 20% school fee rise
- 7% of parents plan to sell their home following the end of the VAT exemption to keep children in private school
- Previously 90% of parents use their monthly income and income from investments to pay school fees, but this will fall by 17% now that the VAT exemption has ended
Ryan McGrath, Director of Second Charge Mortgages at Pepper Money, comments: “The impact of Labour’s decision to end the VAT exemption on private school feels is now starting to be felt, with parents taking a hard look at their finances to see how they can cover the difference.
“The fact that 23% of parents are planning to use credit cards to cover these fees highlights how immediate this burden is, but it also raises concerns about long-term financial health, as credit card debt can accumulate quickly with high interest rates. Similarly, the 8% of parents who have already remortgaged, and the further 13% planning to do so, show the lengths to which families are going to secure their child’s education, by uprooting the entire family in some cases.
“The pressure to keep children in schools where they are already settled is immense, with 70% of parents determined to find a way to cover the rising costs. Homeowner loans offer a practical solution for parents needing to find the funds immediately, without significantly disrupting cash flow or borrowing at high interest rates. By using the equity in their homes as collateral, parents can access a lump sum at relatively lower interest rates compared to unsecured loans or credit cards. A homeowner loan potentially allows them to spread the cost of school fees over a longer period, making it more manageable in the short term. For families confident in their ability to repay, a homeowner loan provides a flexible, accessible option to fund their children’s education while maintaining other financial commitments.”
