Parents 'already downsizing' so they can 'afford' Labour's school fee hike, says top estate agent

Families are 'desperately' downsizing so they can afford to keep children in private schools as Labour's tax raid looms, a leading estate agency boss has said.

Dominic Agace, chief executive of Winkworth, said the plan to levy VAT on school fees was weighing on parts of the property market as families try to save money.

Chancellor Rachel Reeves said during the election campaign that Labour would slap the 20 per cent charge on independent schools within weeks of coming to power.

The aim is to raise £1.5billion a year to recruit 6,500 specialist teachers in state schools and fund mental health support in every school.

The tax will not be retrospective and it is expected to be introduced at the start of the new school year in September 2025. It is estimated that the policy will push tens of thousands of pupils into the state sector.

Speaking about the frustrations of parents, Mr Agace said: 'If their child's in a school, they obviously desperately want to keep them in that school and will try to adjust accordingly.'

Winkworth also revealed that, at the very top end of the property market, uncertainty over rules on non-dom tax status was hitting demand in 'golden' London areas, such as Kensington.

Mr Agace added that uncertainty was affecting the market in London, the South East and South West, with more properties becoming available amid signs of downsizing.

Parents are 'potentially looking at increased costs on education and releasing funds to cover that', he explained. 

'That's affected the top end in zones two and three [in London], but actually, in the country markets, it's the higher end which is weaker.'

This is compounded by higher mortgage rates taking their toll, Mr Agace said. Despite the election, the market has remained strong overall, he said, given Prime Minister Sir Keir Starmer's 'centrist' stance.

'But this taxation on schools issue – that is having an impact, but it's probably only just started,' he added.

Meanwhile, the departure of some pupils from fee-paying education could push up demand for properties near the best state schools.

'You might see people starting to push the competition to get into the right catchment areas. There's always been a premium to that, but I think you'll see that grow,' Mr Agace suggested.

His comments came as Winkworth revealed the election 'appears to have had a less dramatic impact on the market' than previously, 'except for on the demand for high-end properties'.

It said that 'a combination of the Conservative Party's removal of non-domiciled status, the Labour Party's stated intention of adding VAT to private school fees, and the higher cost of finance has weighed on this sector'.

Foreigners who hold non-dom status pay tax on money earned in Britain, but not elsewhere. 

Former chancellor Jeremy Hunt earlier this year announced the scrapping of the status, which will take effect from April 2025.