Parents can dodge Labour’s VAT raid on school fees and save more than £60,000 by paying their bills up front.
A parent sending their child to the average boarding school from Year 6, when many schools start offering boarding, could save an average of £60,364 over the course of their child’s education by paying all their school fees in one go.
This would cost close to £302,000. However, under Labour, with VAT applied, the cost would rise to £362,000.
Many private schools offer “fee in advance” schemes, where parents pay up front and the schools invest the money.
Several leading schools have recently alerted parents to the schemes, to give them a chance to make big savings while they still can.
Among the schools to contact parents about the potential increase in fees because of a new government is St Dunstan’s College in south-east London, where annual fees are nearly £20,000, and Merchant Taylors’ School, in Hertfordshire, where parents pay £25,000 a year.
How the up-front fee schemes work
A fee discount is applied when fees are paid up-front, which typically varies based on interest rates.
It means, when the discount is factored in, the potential savings are even higher.
Sir Keir Starmer has confirmed he would immediately end the VAT-exempt status of independent schools under a Labour government, leaving families with children in private schools facing a 20pc increase on their bills.
Critics of Labour’s plans have warned stripping schools of tax breaks risks making costs unaffordable for parents, resulting in pupils being taken out of private education and burdening the state system.
Financial advisers have urged parents to take advantage of the prepayment schemes if they have the means to, while some schools are preparing to set up prepayment schemes to retain pupils.
Experts say while up-front payments are only likely to be beneficial to parents with relatively large sums of spare cash, it would help soften the blow of future fee increases.
A parent paying for all of their child’s day fees in one go could save on average £46,246 by avoiding paying fees in the years after a potential Labour election victory, according to Telegraph analysis.
Currently, day fees for students average at £231,228 over the 14 years from Reception to Year 13, figures from the ISC suggest.
If VAT was added, this would rise to £277,474 over the same period – an increase of almost £50,000.
Currently, Eton College’s fees would cost £249,990 for the five years pupils spend there. This would go up to £299,988 under Labour, assuming VAT costs are passed on – a rise of £49,998.
On prep schools, a parent would save £44,115 at Cheam School – the school of the late Prince Phillip and the King – paying the bills in one go and avoiding the VAT cost.
And at Cheltenham College, the savings would hit £84,726 if a parent sent their child there from reception all the way through to sixth form.
Andy Butcher of wealth advisers Raymond James said: “We always recommend clients to pay up-front if there’s a pre-payment option.
“The policy is targeting middle-class Britain. From personal experience and from speaking with my clients, Labour’s plans will most affect those with a plan and those who have been saving money up for their children over the past however many years.
“Unfortunately, it blows any planning right out of the water.”
This article was first published on 30 September 2023
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