Entity Setup
How the Removal of Charitable Relief From Private Schools Affects Entity Setup & Tax Planning
Private schools in England that are registered charities will lose business rates charitable relief from April 2025, complicating both right entity structure and long-term cost planning.
By NomadicTax Research Team • 5-8 min read • November 24, 2025
## Overview
From **1 April 2025**, private schools in England that operate as charities will **no longer be eligible** for charitable relief on business rates. This follows the **Non-Domestic Rating (Multipliers and Private Schools) Act**, which received Royal Assent earlier in April 2025. Key implications include significant additional costs for private schools and strategic considerations for governance and structuring. ([gov.uk](https://www.gov.uk/government/publications/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief?utm_source=openai))
## Entity Setup Implications
- **Charity status won’t shield from business rates**: Even if an institution is a charity, if it's a private school providing education and boarding services, it’ll lose relief ([gov.uk](https://www.gov.uk/government/publications/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief?utm_source=openai)).
- **Consider alternate models**: Some schools may explore setting up separate entities that offer services others than core education, to retain certain reliefs—in consultation with legal and tax advisers.
- **Governance changes**: Entities may need to reclassify or reorganize for cost efficiencies and review funding models accordingly.
## Tax Planning & Financial Impacts
- **Cost increases**: Schools previously obtaining relief will face full business rates bills. Financial projections must be updated to capture this additional expense from the 2025/26 year onward. ([gov.uk](https://www.gov.uk/government/publications/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief?utm_source=openai))
- **Fees and budgeting**: To absorb cost increases, schools might need to increase tuition, reduce ancillary services, or reallocate budget funds.
- **VAT considerations**: Alongside business rates, private schools also lose VAT exemption for education and boarding services. Although distinct from rates relief, the combined effect can be material. ([gov.uk](https://www.gov.uk/government/publications/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief/removal-of-eligibility-of-private-schools-for-business-rates-charitable-relief?utm_source=openai))
## Example Case Study
> A private boarding school in England currently benefiting from business rates relief projects a £100,000 bill reduction annually. Losing that relief adds £100,000 cost per year—if student fees don’t cover this, the school must either raise fees or cut non-essential programs.
## Actionable Strategies
- **Early financial modelling**: Run scenario models: (a) with relief; (b) without relief; (c) with partial cost-recovery via fees.
- **Review legal entity structure**: If parts of operation aren’t strictly education (e.g. facilities hire or catering), consider separating them into distinct entities possibly not subject to the same exclusion.
- **Engage stakeholders**: Inform parents, staff, and governing boards of impact well before the 2025/26 school year begins.
- **Charitable status audits**: Ensure charitable status remains appropriate and explore charitable reliefs on non-excluded activities where possible.
- **Explore alternative funding sources**: Grants, donations, fundraising may offset increased tax burden.
## Conclusion
Losing business rates charitable relief represents a **major shift** for private schools, especially those operating as charities. It impacts entity setup, budgeting, and long-term sustainability. Early planning, thorough review of costs and entity structure, and possibly restructuring parts of the operations are essential to mitigate the impact.