Introduction

In January 2025, the UK government introduced a 20% Value Added Tax (VAT) on private school fees, aiming to generate additional revenue for the state education sector. While this policy seeks to address funding disparities, it has raised significant concerns among private Islamic schools and their communities.

The VAT applies uniformly to all private educational institutions, regardless of their fee structures or the communities they serve. This means that both elite institutions with high tuition fees and modestly priced faith-based schools are subject to the same tax rate. The government's objective is to channel the estimated £1.7 billion annual revenue into the state education system, including the recruitment of 6,500 new teachers.

Many Islamic schools in the UK operate with relatively low fees, often around £3,000 per year, to accommodate families from diverse socioeconomic backgrounds.

The introduction of VAT may pose challenges.

A study commissioned by the Association of Muslim Schools (AMS) analysed the accounts of 89 Islamic independent schools. The findings suggest that 70% of these schools could become financially unsustainable due to the VAT imposition, potentially leading to widespread closures.

Schools like Al-Khair Preparatory School in Oldbury have already experienced a decline in student numbers. Headteacher Sajad Akram reported a drop from 127 pupils in July to 97 in September, attributing this to parents' inability to afford the anticipated fee increase resulting from the VAT.

Islamic schools often serve as community hubs, providing not just education but also cultural and religious guidance. The potential closure of these institutions could disrupt community cohesion and limit educational choices for Muslim families.

Leaders and representatives from diverse organisations have expressed deep concerns over the VAT policy.

Ashfaque Chowdhury, AMS Chairman, stated, “The imposition of VAT on small independent faith schools and the removal of business rates relief for schools that are essentially community schools, mistakenly grouped with elite private schools, is deeply disappointing and contradicts previous commitments to support faith-based education."

Julie Robinson, Chief Executive of the Independent Schools Council (ISC) stated, “Highlighting the broader implications, Robinson stated, "I am worried about the loss of variety and diversity in education that this could create. Parents deserve to be able to choose the kind of education they want for their families."

Zvi Sobel, chairman of Bnos Beis Yakov, a Jewish school in London, said he fears the school will collapse in March, adding: "It's heartbreaking, it breaks my heart, I cannot tell you how hard we've worked to get where we are."

The government maintains that the VAT policy is a step towards greater equity in education funding. Education Secretary Bridget Phillipson dismissed concerns from private school representatives as "scaremongering," emphasising the need to raise funds to invest in the state sector.

The uniform application of VAT without exemptions for low-fee schools could lead to School Closures. Financial pressures may force many Islamic schools to shut down, limiting educational options for Muslim families. It could also lead to a loss of Cultural Education. Islamic schools play a crucial role in imparting cultural and religious education. Their absence could lead to a gap in culturally relevant education for Muslim children.

To mitigate these potential adverse effects, several stakeholders are advocating for exemptions for Low-Fee Schools. MPs and educational bodies are urging the government to exempt schools charging less than £5,000 per year from VAT, which would protect many Islamic schools. It is also being advocated for delayed Implementation. The ISC has called for a delay in the VAT implementation to allow for an equality impact assessment, ensuring that the policy does not disproportionately affect faith-based schools and the communities they serve.

While the intent behind the VAT on private school fees is to create a more equitable education funding system, its blanket application raises concerns about unintended consequences for low-fee Islamic schools. Balancing fiscal objectives with the preservation of diverse educational institutions is crucial to ensure that policies do not inadvertently disadvantage minority and religious communities.