Are you better off moving house to beat Labour’s private school fees hike?

Parents with children in private schools are looking at ways to cope with a rise in fees now that Labour has come to power.

A key policy in the Labour general election manifesto was to add VAT to private school fees.

The Labour Party argues that this will help boost the quality of other schools, while critics claim it will just cause private institutions to close and put extra pressure on the state sector.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The change isn’t expected until September 2025 but parents are already taking steps to prepare and are questioning if they can afford to send their children to private school.

Options include saving more and paying in advance while fees or lower but some are even contemplating moving to areas where there are better state schools.

Recoco Property Search says 42% of its clients over the past 18 months instructed the buying agent to act to find them a property to access better schools, while 63% of the clients have actually bought properties did so to access better schools.

But high house prices, mortgage rates, stamp duty and home selling costs mean that even moving may not save that much money compared with just swallowing the fee increase.

Here is what to consider.

How much could private school fees rise by?

The government has promised to introduce VAT on school fees and more detail is likely to come in the chancellor Rachel Reeves’ first Budget, with a date due to be announced in the coming weeks.

The cost could be passed onto parents.

Analysis by investment platform Hargreaves Lansdown shows the average day fee rose 8% to £6,021 per term - or £18,064 for the year, according to the Independent Schools Council.

Assuming a secondary school career of seven years, with inflation running at 3.5% a year, this might cost £140,522.

But if the schools add VAT to this, it would push up the seven-year bill to £168,633 – another £28,000, according to Hargreaves Lansdown.

Should you move house to avoid higher school fees?

If, as many assume, private schools pass on the extra VAT costs to parents, one option could be to move to a different area where fees are lower or to relocate close to a decent state school.

Research by wealth manager Saltus found 50% of parents would be able to keep their child or children in private education but would have to make changes – either moving from boarding to becoming a day pupil or taking them from their current school and enrolling in a cheaper one.

However, a quarter of parents would be forced to remove their child or children from the private sector completely and instead send them to the local state school, Saltus claims.

Parents may not have a choice as some private schools are already losing funding and closing as a result of the proposals.

Estate agents warn that parents moving to areas with better state schools will push up prices.

“Labour’s pledge to levy VAT on school fees has been labelled one of the party’s more controversial ones,” says Nigel Bishop of Recoco Property Search.

“This will leave many parents unable to afford private school education and inevitably impact on the property market by boosting demand for properties in close proximity to good state schools. 

"Properties in these catchment areas can already ask a 20% premium and a politically-caused boost in demand for such homes will create an even more competitive market for buyers.”

Dominic Agace, chief executive at estate agency Winkworth, says the VAT change will be a game changer.

“I think we will see more parents opting for a hybrid version, a mix of private and state schools,” he says.

“The result will be up to 20% premium on homes near good state and grammar schools. 

“We will also see an increase in downsizers as many battle to keep their children in education."

Cost of moving versus paying higher school fees

There are plenty of costs when moving home though, which may work out more expensive than paying extra private school fees.

The average asking price on a top of the ladder home, according to Rightmove, is £689,810.

The stamp duty bill would be £21,990 plus there would be legal, mortgage and moving fees as well as costs to sell your own home, which can run into thousands of pounds.

That is on top of paying the 20% premium typically charged on properties near decent state schools.

The hassle of moving and the savings may therefore not leave you much better off than Hargreaves Lansdown’s estimate of paying an extra £28,000 over seven years of private schooling.

It may be a different consideration if you have more than one child in private school though but there are other ways to manage the costs.

“It’s worth exploring what help is available from various schools, especially if your child is gifted academically, musically, in drama or sports,” says Sarah Coles, head of personal finance for Hargreaves Lansdown.

“You can ask about discounts to see if you qualify. Most schools offer discounts for siblings or staff members, and some have lower fees if you do specific jobs, such as the clergy or armed forces. In any case, if you’re already attending the school and have short-term problems paying fees, talk to them about their hardship arrangements.

“Otherwise, anything you can save or invest in advance will help ease the pain of eye-watering school fees, especially if you can persuade grandparents to chip in. In some cases, it’s worth considering a trust - either straightforward and cost-free bare trusts or more involved education trusts.”