Private schools in Scotland will be taxed full business rates from September next year, the Scottish government has said.

The announcement means all 51 independent schools north of the border will lose their entitlement to relief of up to 20% on their bills for non-domestic rates.

Independent schools have warned the tax change could hit the sector with a bill of £37m in the first five years.

The director of the Scottish Council for Independent Schools (SCIS) said the change would be “to no one’s benefit”.

No other set of organisations in Scotland is seeing such a precipitous tax-rise in such a short period – John Edward, SCIS

Speaking on behalf of the SCIS, director John Edward said: “The removal of charitable rates relief is estimated to cost the sector £7m a year and the only way schools can realistically finance a spending hike of up to six figures per year is to increase their school fees or cut back on the widening participation provisions they have been increasing, at the specific request of the Scottish Parliament.

“No other set of organisations in Scotland is seeing such a precipitous tax-rise in such a short period. Worse still, the aim of the overall Bill is supposedly to make Scotland ‘more’ competitive.”

Edward said the policy would have a wider impact on the economic, educational and social contribution independent schools make to Scotland. He claimed schools might have to cut bursaries and fee assistance for poorer pupils and scale back efforts to share facilities with the local community and neighbourhood state schools to make ends meet.

“The reality is independent schools exist to provide parents with an educational and pastoral choice for their children and this fivefold tax hike in a few months time will result in this choice being reduced – to no one’s benefit,” Edward added.

The tax change was first proposed three years ago following the Barclay Review of independent schools. Schools would only be able to retain their charity relief if they were responsible for teaching children with additional support needs.

Public finance minister Kate Forbes said the announcement “would allow time for those schools affected to plan ahead”.