Education correspondent GENE BRODIE on how one of Croydon’s biggest eceonomic sectors is adjusting to the horrors of having to charge tax
At least three of Croydon’s largest private schools plan to reduce their fees from next January, to take some of the sting out of the Labour Government’s plan to introduce 20% VAT on independent school fees from 2025.
Doing their sums: Croydon’s large private school sector has had to recalculate the fees that they charge
Private schools represent one of Croydon’s biggest economic sectors, with more than 6,000 pupils attending a range of pre-school to Sixth Form institutions around the borough. With fees at Croydon’s private secondary schools averaging around £20,000 per year, this alone represent a £120million annual chunk of the local economy.
Whitgift School, Croydon High and Royal Russell have all advised parents and guardians that they will cut the fees that they charge from January 2025 to reduce the impact of the VAT increase in the invoices sent out from the spring term onwards.
Until this school term, Whitgift, the 1,500-pupil school for boys aged 10 to 18 in South Croydon, had fees that ranged up to £51,120 per year for boarders, with day boys’ parents paying £26,000 per year. At the start of this school year, Whitgift, which runs a menagerie and has peacocks strolling around its grounds, raised its fees by 6.5% – well above the rate of inflation.
Croydon High’s school fees ranged up to £21,303.
Royal Russell, on Coombe Lane, the 900-pupil co-ed day and boarding school for three-year-olds and upward, was charging £23,913 per year for older day pupils.
Input tax: Whitgift School increased its fees by above-inflation 6.5% from September
All three schools have published charts showing “before” and “after” January 2025 fees. The fees charged at each of the schools will rise from the spring term, but by reducing their charges, not by the full 20% incurred by VAT.
Chancellor of the Exchequer Rachel Reeves is expected to confirm the introduction of VAT on school fees in her Budget at Westminster tomorrow. Private school fees have until now been exempt from VAT.
There are about 2,500 private schools in Britain, educating about 7% of all pupils, including about 570,000 in England. About half of England’s private schools also have charitable status, so receive an 80% reduction on business rates.
The average cost of private school fees has risen by 20% in real terms since 2010, and by 55% since 2003, even without VAT. The proportion of children being privately educated over the period has not fallen, according to research by the Institute for Fiscal Studies.
VAT is the purchase tax paid on most goods and services. Since 2011, the standard rate of VAT has been 20%.
The Labour manifesto pledged to end private schools’ VAT exemption and business rate relief, rather than to remove their charitable status.
Making it all add up: how Croydon High School is adjusting its fees from January. Nursery fees remain immune from VAT
The IFS has calculated that the introduction of VAT on private school fees could raise about an extra £1.3billion per year for the Exchequer, after factoring in the number of children who might switch from private schools to state education because of the hike in fees.
One girls’ private school in Croydon town centre, Old Palace – run by the same Whitgift Foundation that operates Whitgift School – had already announced it would close in July 2025 because of its pre-existing financial struggles.
Other, smaller, junior or “prep schools” in the area, have been known to be struggling with finances, especially since the covid lockdown of 2020.
But perhaps a signal of the impact of VAT charged on school fees was demonstrated at a recent open day for prospective parents at another of the larger private schools in Croydon where there was just 120 attendees – around one-third of what the school would usually expect.
The additional income from VAT could allow the government to make a 2% increase in state school spending in England.
But removing the VAT exemption does not necessarily mean fees will go up by 20%.
Andrew Halls, the headmaster at Whitgift, has published a message to parents in which he says: “We are very aware of the additional costs to parents caused by VAT on fees being added from January 2025 – and we want to help.
“We are reducing our current fee back to our 2023 fee level. This means that when we add VAT in January 2025, the new addition will equate to a 12.7% increase on the current fee, rather than the 20% it would have been had we not made this reduction.
New charge: Andrew Halls, head at Whitgift
“This new, reduced level fee will become the basis for any fee changes from the following academic year, 2025-2026, too.
“It is likely we will need to make an inflation-related increase for the 25-26 year, as we think almost all schools will do.
“We hope parents will take comfort from the fact we do not plan to increase the level of our base fee before inflation, and this should mean families will be able to rely on the Whitgift fee being held in as tightly as we can manage in these difficult times.”
The fee reduction will also be applied to Whitgift’s boarding fees.
In a separate letter to parents from the school’s chair of governors, Nick Edwards, it correctly observes that the removal of the school from VAT exempt status means that it will in future be able to reclaim VAT on a portion of its costs, which it had never been allowed to do before.
The changes in fees are all “subject to confirmation in the Budget”. Edwards wrote: “The removal of Business Rates Relief from April 1 2025 will have a negative impact of approximately 1% on our cost base”.
He wrote: “After careful consideration we have chosen to reduce fees for the second two terms this academic year back to the level that they were in 2023-2024, reversing the 6.5% increase for this year.”
Inside Croydon approached a number of other private school businesses around the borough to ask what their fees policy would be if VAT is confirmed on school fees at tomorrow’s Budget. None bothered to respond.
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