If you have children at private school, you will probably have already paid the first instalment of this year’s fees. But if you’re still saving for your children to go in the future, or you’re thinking about how you can maximise your savings for future years, there are several things you can do, and some extra costs you might face.
The first payment you will face will be a registration fee, which you would usually pay at least a year in advance of your child starting at the school. Then there might be exam fees, if your child needs to pass an entrance exam to enter the school, and if they passed, you may also have had to pay a deposit to secure the place.
School fees have been rising, and since 1 January 2025, education and boarding services provided for a charge by private schools have generally been subject to VAT at the standard rate of 20%. Figures from the Independent Schools Council show that from January this year, the average fee for a day school is £6,226 per term, or £18,678 per year, while for boarding school, it’s £14,980 per term, or £44,940 per year.
These are significant sums, and there are various ways you can save for these in the future and reduce these fees where possible. If your child is already attending the school, or is about to start, then it would be worth seeing if they qualify for any scholarships or bursaries. These might be given to children with exceptional sports or writing skills, for example. Or they could be based on affordability criteria, and accessing them would depend on how much your family is earning. You may even find you can get a discount on fees if a parent works at the school, or one of the parents is in, say, the Armed Forces or the church.
The best way to prepare for these fees is to start saving as early as you can. If your child is on the cusp of attending, this doesn’t help so much, but there is always the option of asking if their grandparents can help with the fees.
Payments by grandparents may have inheritance-tax implications. Regular payments towards school fees might qualify for the normal expenditure out of income exemption, but this is not automatic. The payments must form part of the grandparent’s normal expenditure, be made from income and leave them with enough income to maintain their usual standard of living. Appropriate records should be retained, and professional tax advice may be needed.
What else can you do to save for school fees?
An ISA can provide a tax-efficient way to save or invest, as income and gains arising within it are generally tax-free. However, investments held in a stocks and shares ISA can rise or fall in value, and there is no guarantee they will produce enough to meet future school fees. The appropriate balance between cash and investments will depend on factors including the time available, the amount required and the individual’s willingness and capacity to accept investment risk. Anyone unsure about choosing investments should consult an appropriately authorised financial adviser.
A bare trust may sometimes be used to hold money or investments for a child, but it has important legal and tax consequences. The child is the beneficial owner of the assets and will normally become entitled to control them at age 18 in England and Wales, although different rules may apply elsewhere in the UK.
Income and gains do not automatically fall within tax-free allowances in every case. Where a parent provides money for their unmarried minor child and the relevant income exceeds £100 in a tax year, the income may be treated as the parent’s for tax purposes. Different rules may apply to gifts from grandparents. Bare trusts may also have registration, reporting and inheritance-tax implications, so legal and tax advice should be obtained before one is established.
No matter what stage of the school fees journey you’re at, you should take some advice if you’re not sure how to make the best of your savings to cover all the school fees you’re facing for each of your children.
Important: This article is for general information only and does not constitute financial, investment, legal, tax, regulatory or insurance advice, or a recommendation of any product, provider or course of action. The information, figures, fees, interest rates, tax rules, allowances, legal requirements, products and account terms referred to were believed to be correct at the time of writing but may have changed since publication. Do not rely on this article as a statement of the current position. Always check the latest information with the relevant government department, regulator or provider and obtain appropriately qualified professional advice before taking or refraining from action.
Let us help you
If you would like help considering the potential tax and cash-flow implications of school fees, please contact us. For recommendations about investments or savings products, you should speak to an appropriately authorised financial adviser, and obtain legal advice before establishing a trust.
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