Independent Schools – Preparing for a Business Rates Hike in April 2025

The new government’s promise to end the VAT exemption on independent school fees has been well-publicised, and it has certainly aroused concern among schools and fee-payers across the country.

In addition to this, it has announced its intention for independent schools in England to lose their ‘charitable status’ as a ratepayer, which has historically permitted such schools to benefit from an 80% relief in the business rates they pay each year. Wales has just released a consultation to decide whether to follow England’s lead.

Therefore, as it stands, in April 2025, the business rates paid by English independent schools with such a charitable status are set to increase by at least five times the existing amount.

The business rates payable by a school are based on its Rateable Value published in the 2023 Rating List. In the absence of rental evidence, the valuation is calculated by the VOA using the ‘Contractor’s Basis’ of valuation, which is the method adopted when assessing specialist properties which are never usually rented and where no rental information is available to analyse. Effectively, the Ratable Value of a school is based on the cost of constructing a like-for-like building, utilising market construction data, and making suitable adjustments relevant to the subject of ‘hereditament’ (or property).

Full details are currently unclear as to how the removal of the 80% charitable exemption will work in practice, and we expect more information to emerge following the Autumn Budget on 30 October 2024.

However, it is estimated that this new policy will generate some £140m in additional tax revenue for the government, while there are concerns that such schools will be forced to cut costs and scale back scholarships and bursaries.

Many independent schools will be apprehensive for the years to come. Financial planning and accurate budgeting are, therefore, of paramount importance to ensure a smooth transition.

Above all, it is crucial that all liable independent schools have their hereditaments surveyed and reviewed in detail to ensure assessments have been calculated accurately in relation to the current operations of the school. This will ensure that such schools pay the correct business rates for the duration of this Rating List.