Why Private Schools Need a Strong Finance Director Now

For most of the last thirty years, running the finances of an independent school was a relatively stable job. Fees rose steadily, the VAT exemption held, charitable business-rates relief took the edge off the largest fixed cost, and a competent bursar could keep the show on the road without the numbers ever really being in question. That world has gone. Two policy changes in 2025 have reshaped the economics of the sector more sharply than anything since the Assisted Places Scheme was scrapped in the late 1990s — and they are exactly why the calibre of a school’s finance leadership has stopped being a background concern and become one of the most important decisions a governing body makes. This piece sets out what has changed, what it means for school budgets, and why the right finance director matters more now than it has in a generation.

What actually changed in 2025

Two things happened, close together, and their effects compound. First, from 1 January 2025, the standard 20% rate of VAT was applied to private-school fees for the first time — ending the long-standing exemption that had treated education supplied by fee-paying schools as VAT-free. Second, from April 2025, private schools in England with charitable status lost their eligibility for charitable business-rates relief, which had given them an 80% discount on the rates payable on their premises. Taken together, these are not marginal adjustments. A school now has to account for VAT on the fees it charges, navigate the partial-exemption mechanics that come with being able to recover some — but not all — of the VAT on what it buys, and absorb a business-rates bill that has, for many charitable schools, effectively increased fivefold. There is a narrow carve-out: schools wholly or mainly concerned with educating children who have an Education, Health and Care Plan may retain their rates relief. For the great majority, though, both changes bite in full.

It is worth being clear-eyed about the impact rather than alarmist. The sector has proved more resilient than the gloomier pre-implementation forecasts suggested — the Independent Schools Council reported around 13,000 fewer pupils in the first year after the change, well below the 40,000 to 90,000 some had predicted. But “more resilient than feared” is not the same as “unaffected.” Every independent school in the country has had to rethink its fee structure, its cost base, and its financial planning in a way it had never previously had to — and the schools that have handled it best are, almost without exception, the ones with genuine financial expertise at the top table.

Why this is a finance-leadership problem, not just an accounting one

The instinct, faced with a new tax, is to treat it as a compliance exercise: register for VAT, get the returns right, pay the bill. That part matters, and it is not trivial — the partial-exemption calculations alone are more complex than anything most school finance functions had dealt with before. But the harder questions the changes raise are strategic, and they are precisely the questions a strong finance director exists to answer. How much of the 20% do you pass on to parents, and how much do you absorb — and what does each choice do to enrolment, to your bursary provision, and to your reserves? Where in a cost base built for a tax-advantaged era can you find genuine savings without damaging the education itself? What does your cash flow look like across an academic year now that the timing of VAT payments sits on top of the existing rhythm of fee collection? How much financial headroom do you actually have if enrolment softens further — and at what point does that headroom force a hard conversation with governors? These are not bookkeeping questions. They are the questions of a finance director who can model the options, put honest numbers in front of the board, and help the school make decisions it can live with.

What a strong school finance director actually does

The core of the role has always been what it is in any organisation — financial planning and budgeting, accurate and timely reporting to the governing body, cash-flow management, risk and controls, and the strategic partnership with the head and the board that turns numbers into decisions. What has changed is the weight and the stakes attached to each of those in the current environment. Budgeting is now an exercise in modelling fee elasticity and enrolment scenarios, not rolling last year’s figures forward. Reporting to governors now has to make the VAT and rates position legible to trustees who are not finance specialists but are accountable for the school’s survival. Cash-flow management has to absorb a materially larger and differently-timed set of outgoings. Risk management has to take seriously scenarios — a sharper enrolment fall, a covenant pressure, a reserves squeeze — that were once remote and are now live. A finance director who can do all of this with authority is worth a great deal to a school; one who treats the role as ledger-keeping is a genuine liability in a way they simply were not five years ago.

This is also why the model of finance leadership is changing across the sector. Not every school — particularly smaller preps and single-site independents — needs, or can now afford, a full-time finance director of the calibre the moment demands. A growing number are turning to part-time, interim or fractional finance leadership: genuine FD or CFO-level experience, including people who have navigated the VAT transition at other schools, brought in for the days a week the school actually needs rather than as a full-time fixed cost. For a sector newly focused on every line of its cost base, that flexibility is often exactly the right answer — senior expertise where it counts, without adding permanent overhead at the very moment overhead is under scrutiny.

Getting the appointment right

The through-line of everything above is that the person matters more than the job title. School finance leadership is now a specialised role: it needs someone who understands the specific mechanics of school funding and the VAT and rates changes, who can operate in a governance environment of trustees and heads rather than a corporate board, and who can hold a strategic conversation about fees and reserves as comfortably as they can close the year-end. That combination — sector knowledge, current technical grip on the 2025 changes, and the seniority to advise a governing body — is not common, and getting the appointment wrong is expensive in a way schools can no longer shrug off. Whether the right answer for a particular school is a permanent finance director, an interim to steer through a specific period, or a fractional arrangement that brings senior expertise part-time, the decision that matters is matching the right person to the school’s specific situation. That is the judgement a specialist recruiter in this space exists to get right, and in the current climate it is one of the more consequential appointments a school will make.

The schools that will come through the next few years in the strongest shape are not necessarily the ones with the deepest reserves or the most prestigious name. They are the ones that took their finances seriously enough, early enough, to put real financial leadership in place before they needed it — and that treated the 2025 changes not as a crisis to be survived but as the moment the finance function finally earned its seat at the strategic table. For any governing body still weighing whether strong finance leadership is worth the investment, the honest answer is that the question has already been settled by events. The only remaining decision is who, and in what form.

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Adrian Lawrence

Adrian Lawrence FCA is the founder of FD Capital and a Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW). He holds a BSc from Queen Mary College, University of London, and has over 25 years of experience as a Chartered Accountant and finance leader working with private, PE-backed and owner-managed businesses across the UK. He founded FD Capital to connect growing businesses with the Finance Directors and CFOs they need to scale — and personally interviews candidates for senior finance appointments.