Parents find loophole to avoid hike in private school fees as Labour to slap VAT on bills within weeks

Top private schools have seen a surge in parents paying school fees in advance before Labour's VAT raid kicks in.

The move to scrap independent schools' tax-exempt status means families face a 20 per cent hike in fees.

Labour says the tax – which it will use to fund 6,500 more teachers in state schools – is unlikely to come in before 2025 and won't be retrospective.

Financial accounts from private schools show that wealthy parents are dodging it by 'locking in' the current VAT rules, and pre-paying as much as five years' fees in one go rather than termly.

Pre-paid contracts at Eton College – where boarding costs £49,998 per year – have shot up almost four-fold to £10.1 million, from £2.64 million paid upfront by families in 2022. 

At London's Westminster School – which has offered advance fee payments for 45 years – new contracts nearly doubled in a year, from £583,000 in 2022 to more than £1 million in 2023.

Labour previously vowed to slap VAT on private schools within weeks if they won the election. 

Rachel Reeves, then Shadow Chancellor, said last month the contentious measure would be in her first Budget, which could come as soon as September.

Labour sources expect Ms Reeves to publish a three-year spending review at the same time.

Labour has promised an 'immediate injection of cash' for key public services, but the Shadow Chancellor will be forced to choose between hiking taxes further or squeezing spending in other areas. 

The party declined to say exactly when it would introduce VAT on private school fees, but raising fees in the middle of the school year would be hugely disruptive, which suggests that the most likely date will be September 2025.

Ms Reeves previously said she was committed to the plan because 'the children who are struggling most are in state schools - young people are not getting the chance to fulfil their potential'.

Shadow education spokesman Bridget Phillipson also insisted all private schools can 'cut their cloth' to avoid passing on the cost of Labour's planned tax rise.

She said state schools have had to make 'some pretty tough choices in recent years' which independent schools could learn from.

In an interview with the Mail last month, Ms Phillipson also ruled out making any fresh exemptions for special schools - despite a backlash.