The Government confirmed in October’s budget that independent schools will lose their exemption from VAT on school fees in January 2025.  Despite some of the language being used both by politicians and the media, this is a tax on the consumer rather than the organisation.  Therefore, VAT will be applied to all school fees and related educational services.  Any mitigation measures enacted by schools will seek to relieve the overall burden on parents but cannot reduce or eliminate the percentage of VAT charged to parents.

In addition, the Government has confirmed that business rate reliefs currently enjoyed by independent schools, which are charities, will also be removed in April 2025. This will impact all charitable independent schools significantly from the next fiscal year.

The government has announced that these measures in England will generate over £1.6 billion in additional funds to be invested into the state education sector.  Those numbers are disputed by sector representative organisations such as the Independent Schools Council.

The school has put considerable thought into this situation, in the hope that prudent and timely action will mean less uncertainty for parents and children in the coming years. Matters which have been considered by the Governors, include:

• The school currently absorbs VAT on certain goods and services, which in future we will be able to reclaim. It is our intention to pass any such savings to parents, and therefore the final burden is expected to be below the 20% rate of VAT (estimated at around 16%).
• Under the capital goods scheme, we will be able to recover a proportion of VAT on previous and future capital expenditure, which will, over several years, enable us to offset some of the impact of the VAT charge.
• It may be necessary in coming years, to consider some areas of cost saving. This is standard practice in independent schools as a response to economic pressures which can impact the sector from time to time. This may, for example, be evident in terms of a small reduction of curricular provision (e.g very small group options at GCSE/A Level). It may be that our standard class size may slightly increase, although this would still leave them at a very healthy level and well below those in most local schools. We remain committed to managing costs and planning finances carefully to ensure that the outstanding provision for pupils at Hill House remains affordable to our parents.
• Some other schools must carry the continuing burden of significant rises in contributions to the national Teachers’ Pension Scheme. It is the case that Hill House has already dealt with this issue, and it will not be a factor in our calculations in the coming years.

When VAT exemption is removed from independent education in January 2025:

• As a result of the prudent financial management of the school, we are in a position to mitigate, to some extent, the effects of the VAT charge on parents.
• With VAT added, the gross fee will be more than the current fee however, due to the ability to recover a proportion of input VAT, the overall increase will be reduced from the headline 20%.
• The impact on parents will be phased in as a ‘soft landing’ whereby the published pre-VAT school fees will be reduced, in the first instance and for a period of time.    
• Rather than allowing fees to increase by 16-20% in one step midway through the academic year, the board of governors has taken the decision that the school will absorb some of the impact of the VAT for the remainder of the 2024/25 year and beyond.  This means that the impact on families from January 2025 will be a net termly increase (inclusive of VAT) of 9%, with the balance of the cost being met by the school.  We will, in effect, be reducing the school fees so that the impact of the imposition of VAT on parents will be reduced. The table below shows a comparison between the 2024/2025 year school fees before VAT is applied, and the revised charge for the Spring and Summer terms with VAT included.

• Looking ahead, the Governors are hopeful that further support will be available to phase the remaining impact of the cost of VAT to our families over an extended period of time.   
• This will allow parents to come to terms with this tax over a number of years, rather than facing the full impact in one year.

• The school remains committed to supporting families who suffer undue financial hardship.
• The popularity of Hill House in recent years, with numbers at a record high, waiting lists in some years, examination results very strong and recent inspection outcomes being outstanding, all mean that demand for places is very strong and thus support the school’s ability to manage this challenge successfully.
• The recent investments in the school site, including the building of the Pavilion at Blaxton, and the current refurbishment of New Court, show an optimism for the future on behalf of the management and the governors.  This is based on a strong financial position and prudent cost management over the previous decade.

Unfortunately no.  After the election, the government put anti-forestalling rules in place to prevent this.   If an independent school invoices or takes payment on or after 29 July 2024, and this relates to a school term starting on or after 1 January 2025, VAT will be due. 

Hill House has always been at the forefront of educational excellence in the region, providing our pupils with an outstanding academic experience, whilst also offering unmatched extracurricular opportunities and pastoral care. We are truly proud of what our pupils achieve and what our school enables.

We believe that we have also shown ourselves in recent times to be resilient, creative and flexible in how we manage our school. We were proud with how we navigated COVID, and we hope that our response to the pandemic proves our ability to progress and improve our provision even when facing challenges. In the coming years we will similarly continue to innovate; to build and to improve the wonderful experience for every child who attends Hill House School.

We believe that we have a duty both to our current and prospective pupils and parents. We want you to be able to commit to Hill House School confident in the knowledge that you will continue to be able to afford our school fees over the longer term. We believe that the lifelong benefits of a Hill House education are vast, and we want you to remain with us until your child leaves at the end of Sixth Form, having experienced the full range of experiences offered. Therefore, we want to ensure that the impact of the imposition of VAT on your school fees is managed carefully, so that you can continue to enjoy these benefits and opportunities. All of our planning is designed to achieve this end whilst still allowing us to invest in your child’s education as you would hope and expect.

We have always sought to ensure that our parents are well informed about their child’s school. We use the weekly emails to let parents know about our provision and opportunities, and this will continue to provide a means for timely communications. In addition, we have set up this page on our website, where parents can see the schools’ responses to ‘frequently asked questions’ about the impact of proposed Labour Party policies. We will write directly to our parents and prospective parents whenever external circumstances change, and at key points in the implementation of our mitigation strategy. By these means, we intend to keep our whole community well informed not only about the challenges being faced, but our responses.