Removal of eligibility of private schools for business rates charitable relief
Published 9 May 2025
Applies to England
© Crown copyright 2025
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Introduction
From 1 April 2025, in England, private schools that are charities will no longer be eligible to receive business rates charitable relief. The Non-Domestic Rating (Multipliers and Private Schools) Act received Royal Assent on 3 April 2025. This note sets out further information of the impact of the policy.
An initial version of this note was published on 13 November alongside the House of Commons introduction of the Bill.[footnote 1] The information in this note is updated to reflect the latest available data.
Policy objective
The government has removed the VAT exemption for education and boarding services provided by private schools and removed the eligibility of private schools that are charities for business rates charitable relief. The government is taking these steps in order to raise revenue to support the public finances and help deliver the government’s commitments relating to education and young people, including the 94% of school children in the UK that attend state schools.
In making these changes the government aims to ensure that high quality education is available for every child and that the system is fair, with all users of private schools paying their fair share, while ensuring that the impact on pupils with the most acute needs is minimised.
Background to the measure
Business rates is a property tax paid by occupiers, or if unoccupied the owners, of non-domestic properties. The basic rates bill is determined by multiplying the rateable value of a property by the relevant ‘multiplier’. Ratepayers may be eligible for one or more of many mandatory and discretionary reliefs on their bill.
Charitable rates relief is a mandatory relief that provides an 80% relief on the bill for properties that are being used wholly or mainly for charitable purposes (or 100% for unoccupied properties if when next in use they would be used for charitable purposes). In addition, the rating system provides a general exemption for properties that are wholly used for the training or welfare of disabled people.
On 29 July 2024, the government announced private schools in England with charitable status would lose their eligibility for business rates charitable relief from April 2025, subject to parliamentary passage of separate legislation. It was also announced that all education, boarding and vocational training provided for a charge by a private school would be subject to VAT at the standard rate of 20%. The government also published a detailed technical note for consultation requesting views on the technical elements of the proposed changes.
The technical consultation ran for 7 weeks and ended on 15 September 2024. The government received 17,502 responses ahead of the consultation closing date from a range of tax specialists, parents, schools, bodies that represent private schools (including faith schools and special schools), and others. The government’s response to the technical consultation was published on 30 October 2024.[footnote 2] Alongside the technical consultation, government ministers and officials met with a wide range of stakeholders representing schools, local authorities and devolved governments.
This note addresses the impact of the business rates charitable relief measure. The impact of the VAT measure is detailed in “Applying VAT to private school fees”, published on 30 October 2024.
Policy measure
The measure to remove the eligibility for charitable rate relief from private schools is provided through the Non-Domestic Rating (Multipliers and Private Schools) Act.[footnote 3] The Act amends Schedules 4ZA and 4ZB to The Local Government Finance Act 1988 and introduces an exception to the eligibility of business rates charitable relief for occupied and unoccupied hereditaments. The exception has the effect of removing the eligibility of private schools that are charities for charitable rate relief, where occupied and unoccupied (if it is apparent the next use will be wholly or mainly as a private school).
A private school is defined as:
- A school –
- at which full-time education is provided for pupils of compulsory school age (whether or not such education is provided for pupils under or over that age),
- where fees or other consideration are payable for that provision of full time education, and
- which is not a nursery school
- An institution –
- which is wholly or mainly concerned with providing education suitable to the requirements of persons over compulsory school age but under 19,
- at which full-time education is provided for such persons,
- where the provision of such full-time education is wholly or mainly provision in respect of which fees or other consideration are payable, and
- which is not an independent training or learning provider.
An independent training or learning provider means an institution at which education or training is provided for persons over compulsory age but under 19 under a contract with the government, and where the consideration for the provision is payable by the government under that contract.
The Act further provides that should the private school be ‘wholly or mainly’ concerned with providing full-time education to pupils that have an Education, Health and Care plan (EHCP), the measure does not apply and charitable relief is retained.
Private schools that are wholly concerned with the training or welfare of disabled people will continue to be exempt from business rates under the existing exemption as set out above.
Summary of impacts
Exchequer Impact (£ million)
| 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | |
|---|---|---|---|---|---|---|
| Exchequer Impact | +0 | +70 | +85 | +85 | +85 | +90 |
These figures are set out in Table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024. The data update has made no material difference to the figures published at Autumn Budget 2024.
The exchequer impact is lower than the total increase in business rates to private schools. Business rates retention means that local authorities retain a proportion of all business rates revenue. The increase in rates receipts due to the reduction in charitable rates relief for private schools will be shared between central and local government.
The cost also accounts for new burdens funding that English local authorities will receive for administrative and IT costs associated with the measure.
Business Rates Impact
Using Department for Education data the government has identified 2,474 private schools in England, of which 1,127 are charities. As set out above, private schools that are wholly concerned with the training or welfare of disabled people will be exempt (and therefore not appear in rating at all). Under the provisions of the new measure private schools that are wholly or mainly concerned with providing education for pupils with an EHCP will retain their charitable relief (where applicable). Taken together, the government expects 1,024 private schools to lose their business rates charitable relief.
Of those 1,024 schools, the government has linked rateable values for 759 using data provided by the Valuation Office Agency (“the matched cohort”).[footnote 4] For the remaining 265 schools, the government has not been able to match a rateable value (“the unmatched cohort”). The matched cohort caters for c. 365,000 pupils and the unmatched cohort caters for c.66,000 pupils. For the matched cohort, the increase in business rates is estimated by applying the pre- and post-measure tax regime to each school. To estimate the additional increase in business rates associated with unmatched schools, it is assumed that they have the same average rateable value per pupil as the matched schools. This has enabled the government to estimate the average increase in business rates per pupil to be £308 in the financial year 2025/26. In practice, the impact of this change on business rates increase per pupil will vary across the size of the school, the region in which they operate and the rateable value of the property.
The chart below shows the distribution of business rates increases per pupil across the matched cohort in £100 bands. For 53% of schools, the business rates increase per pupil is below £300. 73% of schools have a business rates increase per pupil below £400, and 92% have a business rates increase per pupil below £600. For the remaining 8% of matched schools, the government believes this is consistent with private schools with small pupil populations that are occupying high value properties.
Banded business rates increase per pupil (matched cohort)
Distributional Impact[footnote 5]
By region
The government has considered the geographical distribution of business rates increases across England. For the matched cohort the range of average business rates increase per pupil is £186 (North East) to £361 (South East) – a range of £175. The table below provides further detail.
Regional distribution of business rates increases per pupil (matched cohort)
| Region | No. of Private Schools | No. of pupils | Total 2025-26 Increase in Rates | Average per school | Average per pupil |
|---|---|---|---|---|---|
| East Midlands | 41 | 17,500 | £5,500,000 | £135,000 | £317 |
| East of England | 75 | 43,200 | £12,000,000 | £159,000 | £277 |
| London | 181 | 82,200 | £24,300,000 | £134,000 | £296 |
| North East | 9 | 5,000 | £900,000 | £102,000 | £186 |
| North West | 75 | 33,700 | £7,100,000 | £95,000 | £211 |
| South East | 211 | 104,700 | £37,800,000 | £179,000 | £361 |
| South West | 63 | 31,100 | £10,300,000 | £164,000 | £332 |
| West Midlands | 57 | 26,700 | £8,900,000 | £157,000 | £335 |
| Yorkshire and the Humber | 47 | 20,600 | £5,500,000 | £117,000 | £267 |
| Total | 759 | 364,500 | £112,300,000 | £148,000 | £308 |
The government has also considered the geographical distribution of the unmatched cohort. The table below provides more detail.
Regional distribution (unmatched cohort)
| Region | No. of Private Schools | % of total schools* | No. of pupils | % of total pupils* |
|---|---|---|---|---|
| East Midlands | 19 | 32% | 3,400 | 16% |
| East of England | 33 | 31% | 11,000 | 20% |
| London | 60 | 25% | 11,200 | 12% |
| North East | 9 | 50% | 3,000 | 38% |
| North West | 28 | 27% | 5,600 | 14% |
| South East | 57 | 21% | 14,800 | 12% |
| South West | 30 | 32% | 10,300 | 25% |
| West Midlands | 18 | 24% | 4,400 | 14% |
| Yorkshire and the Humber | 11 | 19% | 2,400 | 10% |
| Total | 265 | 26% | 66,200 | 15% |
*% of matched and unmatched in category, e.g. 25% of schools are unmatched of all private schools in London.
By religious ethos
‘Faith schools’ is terminology used to describe schools that have been legally designated as having a religious character by the Secretary of State. This religious character or ethos is included in the schools registered characteristics. The government has considered the distribution of business rates increases across the religious ethos of private schools. Religious ethos usually pertains to a religious denomination. Due to the high number of denominations present within the data, and high presence of single schools listed for certain denominations, the data below has been aggregated to broad religious grouping. For the matched cohort the range of average business rates increases per pupil is £153 (Jewish) to £339 (Christian) – a range of £186. The table below provides further detail.
Business rates increase per pupil – religious ethos (matched cohort)
| Religious Ethos | No. of Private Schools | No. of pupils | Total 2025-26 Increase in Rates | Average per school | Average per pupil |
|---|---|---|---|---|---|
| Christian | 405 | 214,800 | £72,900,000 | £180,000 | £339 |
| Muslim | 61 | 9,000 | £1,600,000 | £27,000 | £183 |
| Jewish | 37 | 10,700 | £1,600,000 | £44,000 | £153 |
| Other | 45 | 22,000 | £6,200,000 | £137,000 | £279 |
| None | 211 | 108,000 | £30,000,000 | £142,000 | £278 |
| Total | 759 | 364,500 | £112,300,000 | £148,000 | £308 |
The government has also considered the distribution of religious ethos among the unmatched cohort. The table below provides more detail.
Religious ethos (unmatched cohort)
| Religious Ethos | No. of Private Schools | % of total schools* | No. of pupils | % of total pupils* |
|---|---|---|---|---|
| Christian | 111 | 22% | 33,000 | 13% |
| Muslim | 52 | 46% | 8,100 | 47% |
| Jewish | 19 | 34% | 6,100 | 36% |
| Other** | 13 | 22% | 4,900 | 18% |
| None | 70 | 25% | 14,200 | 12% |
| Total | 265 | 26% | 66,200 | 15% |
*% of matched and unmatched in category, e.g. 22% of schools are unmatched in the category of Christian private schools **Due to small numbers this also includes schools of Hindu and Sikh faiths.
By pupil population
The government has considered the distribution of business rates increases across different sizes of school. For the matched cohort the range of average business rates increase per pupil is £288 (1000+ pupils) to £338 (0 to 149 pupils) – a range of £50. The table below provides further detail.
Business rates increase per pupil – pupil population (matched cohort)
| Pupil Band | No. of Private Schools | No. of pupils | Total 2025-26 Increase in Rates | Average per school | Average per pupil |
|---|---|---|---|---|---|
| 0 to 149 | 138 | 13,500 | £4,500,000 | £33,000 | £338 |
| 150 to 299 | 176 | 38,100 | £12,100,000 | £68,000 | £317 |
| 300 to 499 | 170 | 66,300 | £21,200,000 | £125,000 | £320 |
| 500 to 1000 | 192 | 138,800 | £43,400,000 | £226,000 | £313 |
| Above 1000 | 83 | 107,900 | £31,100,000 | £374,000 | £288 |
| Total | 759 | 364,500 | £112,300,000 | £148,000 | £308 |
The government has also considered the distribution of the unmatched cohort by pupil population. The table below provides more detail.
Pupil population (unmatched cohort)
| Pupil Band | No. of Private Schools | % of total schools* | No. of pupils | % of total pupils* |
|---|---|---|---|---|
| 0 to 149 | 110 | 44% | 7,900 | 37% |
| 150 to 299 | 86 | 33% | 18,800 | 33% |
| 300 to 499 | 40 | 19% | 15,500 | 19% |
| 500 to 1000 | 21 | 10% | 14,100 | 9% |
| Above 1000 | 8 | 9% | 9,900 | 8% |
| Total | 265 | 26% | 66,200 | 15% |
*% of matched and unmatched in band, e.g. 44% of private schools are unmatched in 0 to 149 pupil band.
Pupil Moves
The figures below relate only to the business rates measure.
The number of pupils in private schools has remained steady despite a 75% real terms increase in average school fees since 2000.
The government recognises, however, that some parents may not be able or willing to pay higher fees. As a result of the measure the government estimates that, in the long-run steady state there will be 3,100 fewer pupils in the private sector as a result of this measure.[footnote 6] This represents around 0.7% of the current private school population affected by this measure.
Of the 3,100 pupil reduction in the private sector, the government estimates an increase of 2,900 pupils in the state sector in the steady state following the business rates policy taking effect, with 200 being international pupils who don’t move into the state system, or domestic pupils moving into homeschooling. This state sector increase represents approximately 0.03% of total state school pupils population in England of which there are over 9 million.
The government estimates that the increase in pupils at state schools will build up progressively over time as follows:
Estimated cumulative increase in number of pupils at state schools in England resulting from measure, by school year
| 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | Long-term |
|---|---|---|---|---|---|---|
| 300 | 1,200 | 1,700 | 2,000 | 2,200 | 2,400 | 2,900 |
Where this change occurs, the government expects much of it to take place at natural transition points, such as when a child moves from primary to secondary school, or at the beginning of their GCSE or A-level years. Furthermore, some of this change will result from parents opting not to send their child to private school when they otherwise might have done, rather than removing their child from private school. As set out above, the government estimates only 300 moves in 2024-25.
Alongside the revenue raised, this policy will result in some additional costs on state schools due to pupil moves. Based on average 2024 to 2025 per-pupil spending in England, the government expects the revenue costs of pupils entering the state sector as a result of the business rates measure in England to steadily increase to a peak of around £20 million per annum after several years. Overall, this means that expected revenue will substantially outweigh the additional cost pressures. The funding raised by this measure will help the government’s commitments relating to education and young people.
Pupil numbers in schools fluctuate regularly for a number of reasons, and the school funding system in England is already set up to manage that. For individual schools, the government therefore expects changes in pupil numbers resulting from this measure to be managed in the usual way. The government is confident that schools in the state sector will be able to accommodate these additional pupils. The impact on the state education system as a whole is expected to be very small.
Impacts on individuals, households and families
This measure will impact on individuals attending private schools that are charities and their families, who may need to pay increased fees as a result of business rates increases to fees. It will also have an indirect beneficial impact on the over 90% of pupils attending state schools in England, as the revenue raised will help the government to fund its commitments on education and young people.
Parents/carers may choose to increase working hours to cover fee increases, with impacts on work-life balance, or there may be disruption caused by children moving to new schools. Disruption will be greater if these moves occur within school years or key educational stages (e.g GCSEs or A-levels). However, this disruption will only affect a small proportion of pupils and families. The government expects the vast majority of pupils currently in private schools to remain in private schools. There is not expected to be a significant impact on family formation, stability and breakdown as a result of this policy, given that all children of compulsory school age are entitled to a state-funded school place if they need one.
Equalities Impacts
The government does not hold full pupil data for those attending private schools in England that are charities across all protected characteristics. To assess equalities impacts, the government has considered a range of data including Department for Education schools data, consultation responses to HM Treasury’s consultation on ‘Applying VAT to Private School Fees and Removing the Charitable Rates Relief for Private Schools’, and data published by the Independent Schools Council (ISC). The ISC does not represent all private schools but does represent a significant proportion of the sector in both England and the UK.
Age
Approximately 600,000 children, or 6% of school age children are educated at private schools in the UK. As the measure is only applicable to private schools that are charities in England, government analysis indicates c. 431,000 pupils will be impacted by this measure. Where parents and carers with children at private schools are faced with increased fees as a result of this measure, the government expects most families to choose to pay the increase. The revenue raised by this measure will be used to fund the government’s education priorities, benefitting the over 90% of children in England who attend state schools.
In cases where parents are unable or unwilling to pay increased fees resulting from this measure, and children need to move schools, this will result in potentially disruptive impacts.
School closures or expenditure cutbacks, where they do occur, will also impact on some working-age people employed by schools. However, the government expects the vast majority of private schools to remain open following implementation of this measure.
Sex
Of the 1,024 schools impacted by this measure, c.740 are co-educational, while c.290 are single-sex schools. Of the c.431,000 pupils affected by the measure, 49.6% are female and 50.4% are male. Overall, we expect the gender impact of these policy changes to be broadly neutral though there will be some differences between boys and girls given their representation across co-education and single-sex schools.
Ethnicity
The government does not hold ethnicity data of pupils attending private schools in England. In ISC schools (England data), around 40% of pupils in private schools are from an ethnic minority background, which is slightly higher than the proportion of pupils from an ethnic minority background in the state sector in England (36%). We do not have data showing further breakdowns of ethnic groups and therefore cannot determine conclusively if there will be different impacts.
Disability
Approximately 18% of children in England have Special Educational Needs and Disabilities (SEND) which is comparable to the proportion in ISC schools UK wide (20%). Not all SEND pupils have a disability, though it is expected that the majority would be classified as such under the Equality Act 2010. Some disabled pupils in independent schools will have been placed by a local authority through an EHCP.
The business rates system provides an exemption from paying any rates for properties that are used wholly for the training and welfare of disabled people. The measure also provides that where a private school is providing full-time education to pupils for whom an EHCP is maintained that are ‘wholly or mainly’ focused on provision for pupils with an EHCP, the school will retain eligibility for charitable rates relief.
If parents or guardians in England decide to move their disabled child from the private to the state sector, the new state school is required to meet a range of statutory duties that oblige them to ensure that the right support is in place. These include duties under the Equality Act 2010 (for example not discriminating and making reasonable adjustments). If the child’s disability meets the definition of having special educational needs, the state school would have further duties to meet these needs.
In cases where pupils with SEND move schools as a result of this measure, there will be disruptive impacts, while their local authority puts in place measures to meet their needs. Parents or guardians of SEND pupils may experience a more significant administrative burden if they choose to move the child to a different school or apply for an EHCP (or both). However, the government estimates that only a very small minority of private school pupils (0.7%) will move as a result of this measure and that most school moves will occur at natural transition points, which will reduce overall disruption. Longer-term impacts on this group may be lessened by revenue raised by this measure being used to help the over 90% of children who attend state schools in England, including over one million children with SEND.
Religion or belief
Almost half (48%) of ISC schools (UK wide) stated they have a religious affiliation or ethos and could be considered faith schools, compared to around 34% of state-funded mainstream schools. The majority are schools of Christian denominations, though the sector also provides for a range of faiths, including Muslim and Jewish schools. Of the 1,024 schools identified that will lose their charitable rate relief, 73% are listed as having a religious ethos. Of those schools identified as having a religious ethos, 69% are Christian, 15% are Muslim, 8% are Jewish and 8% are Other.
The relationship between school classification and the religion of pupils is complex. Many schools, including both schools with and without a specific religious affiliation, cater for pupils of different faiths and none. The group of private schools classed as faith schools is large and highly varied in terms of numbers of pupils per school, fees, location, faith or denomination represented, and the role of faith within the school (e.g. whether a school has a general faith-based ethos but is designed to cater for children of all faiths and none, or whether a school is designed to cater for a very specific faith community), which makes the assessment of impacts more challenging.
Overall, as there is a lot of variation between faith schools, the government anticipates the impacts of this measure will also vary. Compared to non-faith schools, some may experience more pronounced impacts and some may experience less. In cases where pupils move school as a result of this measure, a greater degree of impact may be felt by faith school pupils if they cannot be placed in an alternative school with the same religious denomination. For some parents and pupils, these impacts could be seen as significant, though the government expects this to occur only in a small number of cases. All children of compulsory school age are entitled to a state-funded school place, and the government is committed to ensuring that all state schools are welcoming environments for children of all faiths and none.
Other protected characteristics
The government has also considered the protected characteristics of sexual orientation, gender reassignment, and pregnancy and maternity, and has not identified any specific impacts from this measure.
Impact on business including civil society organisations
This measure will impact on private schools for children of compulsory school age and institutions such as sixth form colleges which provide education or vocational training for a fee, that are also charities and do not fall within the exceptions above.
Affected private schools are already liable for business rates so we do not anticipate any additional administrative burdens to be placed on them.
Local authorities may experience some additional administrative costs relating to the administration of removing the charitable relief from applicable private schools. The government is undertaking a new burdens assessment and will fund reasonable additional costs for local authorities.
The government recognises that this measure could impact on the viability of certain private schools and, in some cases, contribute towards school closures. However, historically there has been significant turnover within the sector. Since 2000, average fees in the sector have increased by 75% in real terms while pupil numbers have remained stable, as have total school numbers. But this period has seen an average of 74 school closures and 83 new openings each year in England. This makes it difficult to assess the impact of this measure in terms of additional school closures.
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See Removal of eligibility of private schools for business rates charitable relief, published 13 November 2024 (PDF, 306KB) ↩
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Government Response to the Technical Note on Applying VAT to Private School Fees and Removing the Business Rates Charitable Rate Relief: Summary of Responses (PDF, 338KB) ↩
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The Valuation Office Agency (VOA) does not systemically hold data on the occupiers of properties and, therefore, the matching exercise has required manual input to match schools to rateable values. There will remain some uncertainty over whether the exercise has accurately matched rateable values to schools. ↩
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The tabulated figures in this section contain rounded numbers. Totals may not sum due to rounding. Average per pupil values reflect unrounded figures. ↩
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The estimation of the pupil displacement follows the methodology for analysing sensitivity of demand to price for the VAT measure; this is set out in the Annex to the government’s response to the technical consultation (PDF, 338KB) ↩