The number of enquiries for loans to help pay private school fees has surged by a quarter, according to School Fee Plan.

The company, which assists parents by paying school fees upfront and allowing repayments in monthly instalments, has seen a significant rise in interest compared to the same period last year.

School Fee Plan, a subsidiary of Premium Credit, is used by 420 private schools across the UK, including Harrow School. The company charges a transaction fee of around 3.56%, which some schools cover on behalf of parents. Unlike advance fee schemes that offer discounts for lump sum payments, these monthly finance packages help parents manage their cash flow without reducing overall costs.

A spokesman for School Fee Plan explained that the company’s services are more popular among mid-range private schools. The number of parents taking loans with the firm has jumped 93% since 2022, driven by increased private school fees and concerns over Labour’s proposed tax policies.

The surge in demand comes after Labour reiterated its commitment to removing VAT tax exemptions for private schools, making them liable for a 20% VAT charge if the party wins the general election. Stewart Ward, education director at School Fee Plan, warned that this policy could significantly impact both parents and schools, prompting many to seek financial assistance.

“The key thing is at the moment, the traffic we’re seeing on our website, the conversations we’re having with potential new schools is up a reasonably high double digit on the previous year’s activity – probably 25 per cent,” said Mr Ward.

A survey conducted by The Telegraph earlier this year found that 95% of private school leaders expect to increase fees if Labour implements the VAT charge. This has raised concerns that many families could be priced out of private education, potentially leading to a shift of 40,000 pupils from private to state schools, according to the Institute for Fiscal Studies.

School Fee Plan has noted that interest in their services has been driven by several factors, including inflation, pressure on household incomes, and the potential VAT charge. The company supports over 10,000 pupils annually, including students at prestigious institutions such as Harrow, Dulwich College, and Reigate Grammar School.

In some schools, like the £19,000-a-year Wellingborough School in Northamptonshire, about half of the parents use the company’s funding services. Amidst uncertainty, many schools are encouraging parents to pay several years’ fees upfront through advance schemes to avoid potential tax hikes. However, this could lead to tax issues with HMRC, and Labour has hinted at clamping down on such practices.

Labour aims to use the estimated £1.7 billion from the VAT on school fees to recruit 6,500 new state school teachers. A Labour Party spokesperson said, “Labour will invest in delivering a brilliant state education for children in every state school by recruiting over 6,500 new teachers, funded by ending tax breaks for private schools.”

They added that independent schools, which have raised fees above inflation for well over a decade, do not have to pass Labour’s proposed changes onto parents.