A new tax raid on private schools may force some families to leave the UK, it is being warned. With the impending removal of private school VAT exemptions, many parents are expecting school fees to skyrocket when the policy is implemented.
Some families are looking at options abroad – but the Editor-in-Chief of TopMoneyCompare has a particular warning for them.
Russell Gous cautioned that the “attractive option” may have more financial implications than they’re trying to get away from.
He continued: “Relocation costs will fluctuate depending on exchange rates. Exchange markets are notoriously volatile, and a weakening of the pound could dramatically increase the cost of moving abroad.
“Additionally, transferring money overseas comes with fees, especially for large sums, so it’s important these families plan their transfers carefully. They also need to be fully aware of the complexities around dual tax residency and how exchange rates could impact the value of their taxable income.
“For families looking to escape higher education costs in the UK, they may find that the costs of moving abroad outweigh any money they might save on school fees.”
While it may seem like an extreme step simply due to school fee hikes, a Saltus Wealth Index Report poll revealed 1 in 10 wealthy families are considering it.
Despite speculation that the policy will be delayed, like the proposed Winter Fuel Payments changes which are now being debated in court, the Treasury minister James Murray was unmoved.
He said the timeline is still in place for the policy to come into force on January 1, 2025 while speaking on Tuesday in a Westminster Hall debate.
He said, according to The Guardian: “A number of members today have asked why we are introducing this policy in January 2025. The reason for doing so is simple. We want to raise the funding we need as soon as possible to deliver our education priorities for state schools across the country.”
The 20% VAT rate on school fees is planned to raise the money for 6,500 new teachers, better mental health support for children and to fund breakfast clubs for all primary schools – as well as absorbing pupils who leave independent schools, the government says.
Murray declared: “To help fund these improvements to our state schools, we have made the tough but necessary decision to end tax breaks for private schools. We expect most private schools will be able to absorb a significant proportion of this new VAT charge to keep fee increases affordable for most parents.”
