Autumn Budget update for schools

There have been various changes announced by the Government in the Autumn Budget in its bid to prioritise education and young people.

The Department for Education (DfE) settlement will, according to figures in the budget, increase resources by up to £11.2 billion. This is a particularly important investment considering that public services performance, including the education sector, had reached historic lows according to the government’s published Public Spending Audit 2024 – 2025. We explain further how this will be met. Schools and Academies should be prepared for the amendments to come and should act now to ensure they understand what is required of them.

VAT on private school fees

The government is removing the current VAT exemption and from 1 January 2025, in an effort to secure additional funding to help deliver the government’s commitments to public sector education, those paying for private education and boarding fees will pay VAT at a rate of 20%.

This measure will impact on pupils attending private schools and their families, who may need to pay increased fees as a result of VAT passthrough. It will also have indirect beneficial impact on the 94% of pupils attending state schools, as revenue raised will help the government to fund its commitments to education and young people.

The government has left it to individual schools to decide on how they will meet the costs, with ideas ranging from cutting unnecessary internal costs, lowering standard fees by 20% so that parents are paying the same costs, or the idea of increasing costs by up to 20% to cover the VAT bill.

It is important that those providing independent education as well as those paying for independent education understand that if a school takes payment from 30 October 2024 in respect of a term that starts on or after 1 January 2025, VAT will be due from then.

Business rates charitable rate relief for private schools

Private Schools in England will no longer be eligible for charitable rate relief. This change is expected to take effect from April 2025 subject to parliamentary process. However, private schools which are ‘wholly or mainly’ concerned with providing full time education to pupils with an education, health or care plan will continue to be eligible for charitable rate relief. It is important that independent schools understand the changes and their future eligibility for tax reliefs. It is expected that property, or parts of property, used solely for disabled persons will remain exempt from business rates (this is determined by the Valuation Office Agency).

Support for SEN

Amended policies for raising funds for the education sector is expected to raise £1.8 billion per year by the 2029-30 tax year. Children with special educational needs who are at a fee paying school, whether this is private funding or by the local authority as this is the only way their needs can be met, will be compensated for the VAT they are charged on the pupils fees.

Further, as previously mentioned, independent schools which are deemed as charitable (if they provide full time education to pupils with an education, health or care plan) will continue to be eligible for charitable rate relief.

Government statistics demonstrate that over 1.6 million students in England have special educational needs. 434,354 of those have EHC plans in place, while over 1.2 million of them do not. This highlights a large portion of pupils requiring additional support and therefore the increase in funds for the section is likely to be welcomed.

Funding for early years

The budget included investment of an extra £1.8 billion into the early years in 2025-26. This money means the government can continue the expanded roll out of funded children hours for parents of children from 9 months old, up to 3 and 4 year olds. This could result in an increase of parents entering the workforce, or changes to trends with maternity and parental leave, which is something that employers should consider.

Teacher recruitment

As part of the government’s aim to raise funds for the education sector also comes their pledge to support with the recruitment of 6,500 new teachers in England. Whilst a timeline for this implementation hasn’t been confirmed, it is important for schools as employers, both state and independent to make considerations and plans for an expected gradual increase in employees.

Before this review, at the spending audit in July, the Department for Education received an additional £2.1 billion in 2024-2025, including full funding for the 5.5% teacher pay award at a national level. This is another important factors that schools as employers should consider the impact of.

The DfE has said that it is already working on recruiting teachers into shortage subject areas and tackling retention issues.

In the Public Spending Audit 2024 – 2025, it is noted that the Secretary of State for Education will work with the schools’ sector on how to make the most effective use of the workforce, particularly in the context of changes in demographics, with pupil numbers said to be decreasing in primary schools.

NI increases

The government has made the decision to increase the rate of employer National Insurance contributions by 1.2% to a total of 15%. The per employee threshold at which employers start to pay National Insurance will be reduced from £9,100 per year to £5,000 per year. This will undoubtedly impact upon already stretched budgets. Schools as employers should ensure they are aware of these costs and the potential implications it can have on them, as effective from April 2025.

Further guidance and support

With plenty of upcoming changes proposed for the sector, schools and employers within the education sector should keep up to date with the changes introduced by the budget and how these will affect them.

If you need advice on the issues covered in this article, book a 30-minute consultation with our employment law experts. Our Education team are based in Maidstone and Canterbury and are ready to help with any legal advice you may require so please get in touch today.

This content is correct at time of publication