How VAT on UK Private Schools is Impacting the Property Market
The UK government’s decision to add VAT to private school fees which came into play this month, framed as a move to reduce inequality, is sparking debate beyond education. Whilst it is too early to say what definitive impact this increase will make, early signs suggest it could have significant ripple effects on the British property market, says Katherine Watters, The Buying Solution’s Partner for the Southern Home Counties.

A Strain on Family Budgets
The imposition of VAT on private school fees adds up to 20% to already substantial costs, creating a financial pinch point for many middle-income families. For wealthier households – those insulated by substantial assets and high incomes – this change is unlikely to significantly alter their choices. The most prestigious private schools will likely retain their exclusivity, with little effort to moderate fees. On the contrary, these institutions may even double down on their elite status, becoming less accessible to a broader demographic.
However, for dual-income families balancing private school fees with rising mortgage costs and the higher cost of living, the VAT increase is proving to be a tipping point. Anecdotes from my region of Surrey and Sussex already indicate that families are considering pulling children out of private schools and transitioning to the state sector, or exploring international opportunities in order to afford the school fees for their choice of schools. I am aware of three local families who have recently accepted lucrative overseas job postings, driven directly by the financial impact of VAT on school fees. With their children already registered at top-tier institutions like Eton, relocating abroad has become their only viable option to fulfil their educational plans. Such stories underscore the financial gymnastics now required to maintain private education.
State Schools and Grammar Catchment Areas: Property Hotspots
The shift in demand toward state schools, particularly grammar schools, is already impacting the property market. As families reconsider private education, catchment areas for top-performing state schools are becoming increasingly competitive. There are currently 163 state-funded grammar schools across England with the largest number found in Kent (38), London (19), Lincolnshire (15), Buckinghamshire (13), Essex (eight) and Birmingham (eight). Proximity to a strong state or grammar school has always been a draw, but the new pressure from families exiting the private system is likely to intensify the scramble for homes in these coveted zones.
Conversely, areas around smaller private schools, which were previously buoyed by steady enrolment, could face cooling property prices. Many such schools are consolidating to survive – forming federations to pool resources and remain viable. While this consolidation secures the future of these schools, it signals potential declines in local property demand as families reconsider their educational priorities.
Implications for the State Sector
The migration from private to state schools may also have unintended consequences for the state education system, which is already under pressure. Increased demand for places in top-performing schools will push local councils to expand capacity, potentially altering the dynamics of residential areas. Overcrowding and stretched resources could create a new set of challenges, driving further polarisation within the education system. Simultaneously, the influx of higher-income families into the state system may fuel rising house prices in well-regarded school districts.
Mortgage Pressures and Downsizing Decisions
The broader economic context – high interest rates and mortgage costs – is exacerbating the strain. Families who leveraged historically low interest rates to trade up the property ladder are now grappling with significantly higher monthly repayments. This shift is reducing disposable income previously allocated to private school fees, luxury purchases, or travel.
As a result, some homeowners are quietly putting their properties on the market which presents opportunities for buyers. Downsizing is emerging as a strategic move, freeing up equity to cover school fees or reduce mortgage payments. This trend is evident in commuter belts like Surrey and Sussex, where large family homes are appearing in private sales. Such moves illustrate a recalibration of priorities, with families opting to downsize their homes to preserve educational aspirations.
A Mixed Market Outlook
In the broader property market, the VAT policy is contributing to a landscape that is already complex. The post-COVID property boom, characterised by inflated prices and fierce competition, is normalising. Some regions, particularly in the super-prime market, are seeing more realistic valuations and renewed activity. However, stock remains limited, and affordability continues to dominate decision-making for many.
For agents operating in commuter towns and popular rural locations, the mood is cautiously optimistic. Valuations and transactions are picking up, and spring 2025 is expected to bring more movement as vendors and buyers adapt to the new normal. Catchment areas for strong state schools and accessible rural hotspots, such as the Surrey Hills and the South Downs, are likely to remain resilient.
How The Buying Solution Can Help
As with many fiscal policies, the effects of VAT on private schools will fully reveal themselves over time – and possibly the law of unintended consequences – rippling through education, property and lifestyle choices. For families, schools and property markets alike, adaptation will be key in navigating this period of transformation. Our specialist buying agents, together with our network of leading education consultants, can offer highly personalised advice on everything from catchment areas and desirable locations to ensuring you make a sustainable investment, helping you to make confident and well-informed decisions for you and your family.

Katherine Watters is our specialist Partner for the Southern Home Counties
Explore more of The Buying Solution’s Insights.