School Fees Planning

Research from the Independent Schools Council (ISC) in its latest Census and Annual Report 2023 shows that:

93% of pupils who leave independent schools go on to higher education.
50% go to a top 25 university.
4% go to Oxbridge.

The ISC report also shows that the typical fee for a private day school is £5,552 per term or £16,656 per annum. The average fee increased between 2022 and 2023 by 5.6% broadly in line with the increase in average earnings.

Funding School Fees

Given the advantages of sending their children to an independent school and the significant costs involved, it makes sense for parents to consider some of the ways that school fees can be funded.

For many people, school fees will be funded from earned income and will simply represent a relatively sizeable expenditure item at the start of each term. However, where children are still very young, or where grandparents are willing to help, there can be an opportunity for some financial planning.

Start Saving Early

Establishing a regular savings plan early on can help build up a sizeable school fees pot which then could go some way to paying some of the school fees. Where there is a relatively long time-horizon, for example where parents are looking to plan for secondary school fees whilst their children are still very young, a degree of investment risk could be considered which would involve exposure to equity investments.

Parents could use their ISA allowances each year to ensure that the money is being invested as tax efficiently as possible.

Grandparents

Gifts from grandparents to help fund school fees can be particularly tax-efficient especially if the grandparents are looking to reduce any Inheritance Tax (IHT) liability as part of a wider estate planning strategy. There are a number of ways that this can be done:

Using the annual ‘Gift Allowance’ of £3,000 per grandparent.
Where more significant gifts are given, these will be IHT free if the grandparent survives seven years after making the gift.
Regular gifts out of income can be attractive where grandparents have surplus income that could be used to help fund school fees without compromising their standard of living.
Setting up a Bare Trust can be relatively tax efficient. In a Bare Trust, the assets are held by a trustee (the grandparent) for the benefit of the beneficiary (the grandchild). The assets are then taxed as if they belonged to the grandchild which means that the grandparents can take advantage of the grandchild’s personal tax allowances. Once the grandparents have lived seven years the gift into the Bare Trust will be out of their estate.

School Fees Planning Combined With Estate Planning

School fees planning when combined with estate planning can be a great way to make a positive impact for future generations although it can be a complex area of financial planning where advice should be sought.

Contact Us

If you would like to discuss school fees planning in more detail and see how this can be combined with estate planning, please do contact us.