It’s only natural to want to give your children the best possible start in life, and that might include securing them a place at a leading independent school.
You may have already factored in the costs of their schooling into your financial plan. However, the chancellor’s Autumn Budget confirmed that the VAT exemption for independent schools would be removed from 1 January 2025, which could lead to a substantial increase in costs.
While some schools have indicated they will offset part of the increase through cost-saving measures, others have already confirmed that they will be adding the full 20% of VAT to fees.
The Times estimates that without the VAT exemption, the total cost of sending your child to a private day school for their entire education could reach around £350,000. For boarding school, the cost could rise to approximately £694,400.
For comparison, had your child just finished their schooling years, these figures would have been £194,000 and £392,300 respectively.
So, in light of the VAT exemption being rescinded, read on to discover five ways to help you manage private school fees.
1. Use different types of schooling for part of your child’s education
The cost of enrolling your child in an independent school for their entire education is substantial, but there are significant cost differences between boarding schools and day schools, as you read earlier.
So, one potential approach is to enrol your child in a day school for either their primary or secondary education and transition to a boarding school for the other phase.
Alternatively, you could use the state school system for part of their education as this can significantly reduce overall expenses.
For instance, the Times report found that the average cost of sending your child to a private day school from years 7 to 11 (ages 11 to 16) is approximately £149,048. Meanwhile, the cost of doing so for their entire school years is around £350,000.
So, using the state system for primary school and sixth form could save you over £200,000.
You might prioritise private schooling or boarding during a particular stage of your child’s education that you value most, such as their formative primary years or the exam-focused secondary years. By opting for state schools or day attendance during other periods, you could make the more expensive years of their education more financially attainable.
2. Apply for bursaries or scholarships
Many independent schools offer scholarships and bursaries to students based on their academic achievement and personal circumstances. Some schools even provide full fee waivers for eligible students.
If you’re concerned about affording the fees at your preferred school, it’s worth researching the scholarships they offer and reviewing the eligibility criteria to determine whether your child could qualify.
If you’re already facing significantly higher fees and your child isn’t eligible for a scholarship, it could be a good idea to discuss your situation directly with the school. Many schools have access to grants or other support mechanisms that may help alleviate the financial burden.
3. Explore additional financial resources within your family
Finding additional resources within your family can considerably boost your financial position and help cover your children’s school fees.
For example, if either you or your partner are currently not working, returning to the workforce could provide valuable additional income.
Support from grandparents can also be very useful.
For instance, many grandparents choose to establish bare trusts as a tax-efficient method of saving for their grandchildren’s education.
Bare trusts offer particular Income and Inheritance Tax benefits when set up by grandparents, making them a more efficient option compared to those established by parents.
4. Release capital from your assets
If you’ve explored other options but still need additional funds in the short term to cover school fees, releasing capital from your assets could be a potential solution.
This could involve:
- Liquidating some of your investments
- Withdrawing a portion of your tax-free lump sum from your pension (provided you’ve reached the normal minimum pension age)
- Releasing equity from your property.
Before making any decisions to release capital from your assets, it’s a good idea to speak to a financial planner. They can help you understand the long-term implications for your finances and ensure that the choice aligns with your wider financial goals.
5. Speak to a financial planner
A financial planner can help you create a tailored plan to save for your child’s school fees.
They can use cashflow modelling to assess the long-term effect of the costs on your wider financial goals. They can also work with you to find appropriate and efficient investment options and to set realistic savings targets.
By factoring in the timeline for your child’s enrolment and the projected increase in fees, a financial planner can help you map a clear path forward, ensuring your child’s education is secure and the fees don’t compromise your progress toward your other goals.
To speak to a financial planner, get in touch.
Email us at hello@vwmwealth.com or call us on 0141 229 4004.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate cashflow planning or tax planning.
Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
