Education and vocational training supplied for a charge by an eligible body, such as a school, college, university or qualifying non profit organisation, are exempt from VAT under Group 6 of Schedule 9 to the VAT Act 1994. Since 1 January 2025 a new Part 3 of Schedule 9, inserted by section 47 of the Finance Act 2025, takes education and vocational training supplied by private schools, and closely related boarding, out of that exemption, so private school fees now carry VAT at the standard rate of 20%.

How does the education exemption work?

Item 1 of Group 6 exempts the provision of education, research or vocational training by an eligible body. Two questions decide the liability: is the supplier an eligible body, and is what it supplies education or vocational training? If the answer to either is no, the supply is standard rated unless another route applies, such as private tuition by an individual teacher (item 2), examination services (item 3), or training paid for from government funding schemes (items 5 to 5C).

The exemption is relevant only where a charge is made. VAT Notice 701/30 explains that education provided free, as in local authority maintained schools, academies and free schools, is not a business activity and is outside the scope of VAT. Where a charge is made, education is still a business activity even if the fee is subsidised by a grant, bursary or scholarship, and it makes no difference whether the student, an employer or a local authority pays.

Exemption has a cost: VAT on purchases used for exempt supplies cannot normally be reclaimed. The difference from zero rating is set out in zero rated versus exempt supplies.

Who is an eligible body?

Note 1 to Group 6 lists schools, UK universities and their colleges, further education institutions, public bodies, bodies teaching English as a foreign language, and non profit bodies. A non profit body qualifies only if it is precluded from distributing and does not distribute any profit, and applies any profits from its education supplies to continuing or improving them. Notice 701/30 paragraph 4.5 warns that distribution is not limited to dividends: donations to another body, even a charity, and management charges paid to an associated company or individual can count.

Commercial providers run to make and distribute profits, such as tutorial colleges, computer training firms and secretarial colleges, are unlikely to be eligible bodies, so their courses are standard rated. A commercial provider of tuition in English as a foreign language is an eligible body, but Note 2 limits its exemption to that teaching alone.

What counts as education, and what is closely related?

HMRC defines education as a course, class or lesson of instruction or study in any subject, wherever and whenever it takes place, including lectures, seminars, conferences, recreational and sporting courses and distance learning. Admission to plays, concerts, sports meetings and exhibitions is not education.

Item 4 extends exemption to goods and services closely related to exempt education, supplied by or to the eligible body, where they are for the direct use of the pupil or student and necessary to deliver the education. HMRC accepts that accommodation, catering, transport, school trips and field trips can be closely related. Supplies to staff, school shop and bar sales, school uniforms, separately charged laundry and admission charges are not, and are taxable unless another relief applies.

Why are private school fees now standard rated?

Part 3 of Schedule 9 lists exceptions to the exemptions. Item 1 removes the provision of education by a private school, other than teaching English as a foreign language, education in a nursery class and higher education courses. Item 2 removes vocational training by a private school, and item 3 removes board and lodging closely related to either. These supplies are therefore taxable at 20%.

A private school is either a school providing full time education to pupils of compulsory school age for a fee, other than a nursery school, or an institution wholly or mainly concerned with full time education for those over compulsory school age but under 19 where that education is wholly or mainly fee paying, such as a private sixth form college. HMRC states that compulsory school age is 5 in England and Wales and 4 in Northern Ireland, and school age in Scotland is 5. A nursery class made up wholly or almost wholly of younger children stays exempt, and HMRC gives a class of 90% or more children under compulsory school age as an example.

Note 4 to Part 3 stops schools routing education through a related exempt body. Education at a private school supplied by another eligible body is treated as supplied by the private school if the two are connected under section 1122 of the Corporation Tax Act 2010, or if the arrangements have securing exemption as a main purpose. The general meaning of connection is covered in connected persons for tax.

What else does a private school charge VAT on?

  • Application and registration fees required for a pupil to attend are taxed like normal fees.
  • VAT is due on everything received for the education, including any external bursary paid towards a pupil’s fees.
  • Educational extra curricular activities are taxable, but before and after school childcare and care based holiday clubs are exempt.
  • Where a local authority funds a place named in a pupil’s education, health and care plan, VAT is due and the authority reclaims it through its section 33 process.
  • Goods and services for the direct use of pupils that are necessary for the education, such as classroom supplies, remain exempt as closely related supplies.
  • Genuine donations, freely given with nothing in return and no conditions, are outside the scope of VAT.

What about fees paid in advance?

HMRC’s guidance sets out three bands for fees relating to terms starting on or after 1 January 2025:

When the fee was paid VAT treatment
Before 29 July 2024 Depends on the terms of the agreement; no VAT where the payment itself created the tax point
29 July 2024 to 29 October 2024 Subject to VAT from the later of the first day of the term paid for and 1 January 2025
On or after 30 October 2024 Subject to VAT on the date the payment is received

Private schools must register once taxable turnover in the last 12 months exceeds £90,000, or if they expect to receive more than £90,000 in the next 30 days, in line with the normal VAT registration threshold. A school providing only nursery education does not need to register.

Can a private school reclaim VAT?

Yes, on costs used for taxable education and boarding. Most private schools also make exempt supplies, such as nursery classes and closely related services, so they are partly exempt and need a partial exemption calculation. HMRC’s guidance says VAT can be reclaimed on goods received up to 4 years before registration that are still on hand, and on services received up to 6 months before registration, apportioned for any exempt use. Buildings and civil engineering works worth £250,000 or more, and computer equipment worth £50,000 or more, fall within the Capital Goods Scheme, which can allow some recovery on assets less than 10 years old that are now used for taxable education.

How does this look for a family paying fees?

Illustration only. A school charges £7,200 a term including VAT for a pupil aged 12. The parents pay £6,000 and a separate bursary trust pays £1,200. The VAT is one sixth of the total consideration, so £1,200 is due on the full £7,200, not just on the parents’ share. If lunches are charged separately and meet the closely related conditions they may be exempt, but if they are included in a single inclusive fee they take the VAT treatment of the education. The same school’s nursery class for three and four year olds stays exempt.

What mistakes come up most often?

  • Assuming a charity running a school is still exempt. The private school definition does not depend on charitable status.
  • Splitting an inclusive fee artificially into exempt and taxable parts. HMRC treats a single package as one supply.
  • Leaving registration fees, deposits and external bursaries out of the VAT calculation.
  • Routing teaching through a connected company or trust, which Note 4 treats as supply by the school.

For how fee charging affects the zero rate on new school buildings, see charitable and residential purpose buildings.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.