Deciding on their child’s education is one of the most important decisions parents will make.
For those parents wanting to enrol their child in private school education, careful consideration will need to be given in light of the government’s decision to subject private school fees to the standard VAT rate of 20% from January 2025. This means parents will see two fee increases in the next 2024/25 school year – the annual inflationary increase which takes place in September and VAT increase in January.
In an article published by Moneyweek, earlier this year, Hargreaves Lansdown calculated that the average fees for a private secondary school over seven years totalled £140,552, with 3.5% annual inflation factored in. However, with the new 20% VAT hike, according to the investment platform this will now see the figure pushed up to £168,633. By no means a small change!
Another issue for parents is that the government has confirmed that it will be applying the legislation retrospectively to close the loophole of parents paying fees in advance of the VAT kicking in, making clear that any fees paid in advance from 29 July 2024 will be subject to the tax.
The government’s decision has a number of challenges for families already impacted by the cost of living crisis. However, couples who are going through, or have already gone through, a separation or divorce will no doubt be most affected. By way of example:
- In a situation where there is an existing court order setting out who is required to pay school fees, the increase in fees may lead to difficulties meeting the payments. In fact, the paying parent may no longer afford to pay these at all, leading to:
- The court order being breached and the other parent having to apply to court for enforcement; or
- The paying parent applying to the court on the basis of a change in their financial circumstances necessitating a variation or discharge of the court order.
- If private school fees are no longer affordable, parents may need to rethink their suitable location for housing following their separation to allow them to be nearer to the catchment area of preferred state schools. In this scenario, the capital required to re-house in a chosen area may be impacted and this will need to be factored into any final agreement.
- In some cases, parents choose to “top-slice” a lump sum from the sale of the family home or other assets in order to set aside capital to meet future school fees. Clearly the sum required will now be significantly larger and this mean that it is no longer a realistic way forward or that the parents have to downsize their own rehousing options from the remaining funds as a result.
- Where parents cannot agree about whether state or private school education is the best option for their child, the parent favouring the state school system could now have a stronger case (at least as far as affordability arguments go) if the matter has to be taken to court or arbitration to determine the issue of schooling.
The decision on schooling falls to both parents and anyone who has parental responsibility for the child. Parents who are separating, or have separated, should try to liaise with each other to resolve the issue of schooling. Of utmost importance is for parents to consider their child’s best interests. If no agreement can be reached, parents should consider obtaining legal advice to see what options are available to them such as exploring non-court dispute resolution (solicitor-negotiation, mediation or arbitration). In cases where non-court dispute resolution is not suitable, a parent would need to apply to the family court for a judge to make the ultimate decision. In any event, it is important to get early legal advice, especially when existing orders or agreement may need review. Rayden Solicitors can assist with arrangements for your children, so please contact us if you need support with anything covered in this blog.
