Build funds gradually over time and ideally before your child is even born. Some may consider waiting until secondary school for private education to extend the time they have to save, but no one should have to compromise on their goals. Our planners will look into all options available for you.
20% More Reasons to Review Private School Plans
It’s not good news for those that have committed to their child’s private education, but there are ways to make the finances work.
From the start of 2025, 20% VAT has been added to private school fees, and only excluding some special educational needs students. That’s a huge leap for many families already pushed to afford the 2024 average annual fee of £18,063* for day pupils and rising.
Is Private School Worth It?
Despite the costs, private education remains appealing to many for its academic, extracurricular, and networking benefits. Families should always weigh the long-term advantages against the financial commitment.
Hidden Costs
When budgeting, make sure you factor in additional expenses too like uniforms, school trips, and annual fee increases, which can add around 10% to fees.
How to make the numbers work
Consulting a Financial Adviser early on can take the headache out of trying to plan for big ongoing expenses such as fees. An expert can help tailor your savings strategy and assess any risks.
The bill payer will also want to consider protecting their income against unforeseen changes, as a commitment to private schooling is long-term. It could be heartbreaking for a family if the child can no longer stay at a school they love.
This is where our Pinnacle Lifeplan comes into its own. Our Advisers will plot the cost of school fees over the years into a client’s personal LifePlan against their income and all other savings and investments – this gives the individual a clear forecast of what they can afford now and in the future.
Areas to review:
Regular Savings Plans
ISAs
Saving into a tax-efficient ISA either Cash or Stocks and Shares, means you can use your full annual ISA allowance of £20,000 a year before tax – £40,000 if you’re a couple. However, if you’re going to afford this scale of school fees, putting money into a cash savings account, or a cash ISA, is unlikely to give you the best returns. Even if you allow plenty of time, and interest rates remain above the rate of inflation.
Investing in a Stocks and Shares ISA provides the potential to outperform cash holdings over the mid- to long-term. But, like all stock market investments, a Stocks and Shares ISA does carry more risk. Your Adviser will walk you through all the opportunities and pitfalls.
An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA or cash savings account.
The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.
Please note that Cash ISAs are not available through St. James’s Place.
The Bank of Grandma and Grandpa
Grandparents can play a pivotal role by contributing to school fees directly, rather than leaving money in their Will**. Not only does this allow them to witness the impact of their support, but also annual financial gifts of up to 3,000 are exempt from inheritance tax and can be used towards education.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
Careful financial planning as early as you can with professional advice will be key to affording private education comfortably amid rising fees and VAT.
Giving your children the best start in life is invaluable. Make sure you’ve done your homework first before embarking on a long-term commitment that could cause a lot of upset if you ever needed to backtrack.
**The writing of a Will involves the referral to a service that is separate and distinct from those offered by St. James’s Place. Wills and Powers of Attorney are not regulated by the Financial Conduct Agency.
Sources
*Independent School Council, August 2024
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