The UK government has introduced a new 20% VAT on independent schools. In this article we discuss the impact, and the inevitable new approaches schools are taking.
The UK government, has outlined plans to impose a 20% VAT on independent school fees and remove the business rates charitable relief that these schools currently enjoy. This proposal has been a part of Labour's policy discussions since 2017 and despite it’s current buzzword status; its something we’ve all known would be coming in the event of Labour’s successful election campaign earlier in the year. The tax increase is aimed at generating additional revenue, estimated to be around £1.6 billion to £1.7 billion annually (GOV.UK).
The proposed changes would mean a significant increase in fees for independent schools, potentially adding approximately 20% to the current costs. The UK Government argues that this revenue could be used to improve state education and provide more resources for disadvantaged students (GOV.UK).
One major concern is that many of those paying for independent education for their children, do so with significant self-sacrifice.
I lament the political debate, the loss of nuance and insight into the impact on children.The sector is not Eton or Harrow or Winchester, the big posh boarding schools largely based in the south of England. The majority is made up of schools like mine where parents are making real sacrifices to pay the school fees because that's how they are choosing to prioritise their spending.
Headteacher Tony Oulton , Hulme Grammar School via Sky News
Therefore the increased costs might push many parents to transfer their children from independent schools to state schools, leading to a higher demand for state school places- going onto potentially lower the impact of the intended revenue this should generate. For many that send their children to private schools, a 20% tax rise will increase the costs if schools decide to reflect this in their fees.
We can’t change government policy, but we can help schools react to this new fiscal reality. The likelihood is, those schools that do nothing, or who freeze activities and enter into ‘survival’ mode are those that put themselves at the greatest risk. In business, and let’s remember schools are in the business of education - adversity needs to be viewed as opportunity - with VAT on fees giving schools a marketing opportunity to stand-out, differentiate themselves and draw attention to the school through creating their own unique interpretation, narrative and message.
Dan Clarke, UBIQ CEO
In light of the impending 20% VAT increase and the removal of business rates relief for independent schools in the UK, it is crucial to maintain robust marketing efforts rather than reducing or ceasing marketing budgets. Here are key reasons why schools should avoid panic decision-making and continue investing in marketing, particularly by leveraging AMAIS:
Avoiding Panic Decisions
- Strategic Planning: Instead of making hasty cuts to marketing budgets, schools should undertake a strategic review of their marketing efforts, identifying areas where digital tools like AMAIS can enhance efficiency and effectiveness.
- Long-Term Benefits: Maintaining marketing investments ensures long-term sustainability by keeping enrollment numbers strong and building a loyal community that can support the school financially through fundraising and donations.
- Adaptation and Innovation: By adopting innovative solutions like AMAIS, schools can adapt to the new financial landscape in a proactive manner, turning potential challenges into opportunities for growth and differentiation.
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