PolicyLens

Methodology note

Remove VAT from private-school fees: calculation note

Scenario assumptions behind the Remove VAT from private-school fees estimate. The figures are illustrative and exclude unrelated Conservative pledges.

View main policy page: Remove VAT from private-school fees

Central fiscal result

+GBP 1.8bn - Net fiscal impact in 2028-29

Low case: +GBP 1.0bn. High case: +GBP 3.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Model removal of 20 percent VAT on private-school fees by 2028-29.
  • Central cost is GBP 1.8bn net of state-school displacement.
  • Baseline is VAT charge from January 2025.
  • Business-rates relief is not separately reversed unless specified.

Affected population

  • Affected population is private-school pupils, parents and providers.
  • Direct gains depend on pass-through to fees.
  • Indirect exposure includes state schools and local authorities.
  • Distribution skews toward higher-income households.

Gross impact

  • Gross VAT revenue loss assumed GBP 2.1bn.
  • State-school displacement offset assumed GBP 0.3bn.
  • Central net cost: GBP 1.8bn.
  • High case assumes weak displacement savings and high pass-through uncertainty.

Fiscal build-up, central case

  • Lost VAT receipts: +GBP 2.1bn
  • Lower state-school placement costs: -GBP 0.3bn
  • Administration and compliance savings: GBP 0.0bn
  • Other tax effects: GBP 0.0bn

Central net impact: +GBP 1.8bn in 2028-29.

Behaviour and pass-through

  • Low case assumes more private-school retention and lower state-school costs.
  • Central case assumes partial offset from fewer transfers.
  • High case assumes most VAT revenue is lost with limited public-sector offset.
  • Schools may retain part of the tax cut.
  • No wider productivity gain is booked.

Phasing

  • 2026-27: +GBP 0.5bn. Preparation or partial implementation.
  • 2027-28: +GBP 1.6bn. Main ramp-up year.
  • 2028-29: +GBP 1.8bn. Target-year central estimate.
  • 2029-30: +GBP 1.8bn. Continuation at steady-state assumptions.

Main source groups

  • con-plan-2026: Conservative live policy page; used to identify current pledge wording.
  • private-school-vat-2024: HMRC tax note; private-school VAT baseline.
  • commons-private-vat-2026: Commons Library briefing; private-school VAT context.
  • hmrc-ready-2025: HMRC tax ready reckoners; main tax-cost anchor.
  • benzarti-et-al-2020: VAT incidence asymmetry; informs behavioural and incidence assumptions.
  • epple-romano-urquiola-2017: Private-school market effects; informs behavioural and incidence assumptions.