If you have made the choice to send your child to an independent school, you may now be looking at how you can adjust savings to be able to pay for the fees. On average, according to the Independent Schools Council, term fees amount to £4,765 a term whilst those including boarding are usually around £8,100 and they are on the rise2. In fact, in 2011 there was a 4.5% rise in fees, well above inflation1. It’s therefore essential to start saving early and to look at all your options. Here are some options to consider:
- Look at long term investments that could potentially give you a better return. Invest early to give time for accumulation and to ride out the ups and downs of the stock market
- One third of students now receive funding so apply for scholarships and bursaries1.
- Find out if the school allow staggered payment so you can spread the cost.
- Consider making gifts to the child’s fund which will also has inheritance tax benefits. Grandparents and other relatives would be able to do this. Grandparents can give up to £3,000 a year as gifts. You can give gifts of up to £3000 a year or £6000 if you are a couple to other people including children and godchildren, also free of tax, per year. If you miss a year, the allowance can be combined with the following year but for that year only.
- You can also give gifts of up to £250 multiple times to a number of recipients free of incurring tax at for example birthdays and Christmas, providing you survive for 7 years after the gift has been made. There is a limit of £100 per year in interest/income that a child can receive tax free from gifts from their parents so just be aware of this.
- You could consider a school fee plan but you need to make sure it is right for your personal circumstances so it is often better to get independent bespoke advice.
- A Trust could be set up for the child to access at a set age for school fees, making the most of the tax-efficient benefits. You can place up to £325,000 in a trust without incurring tax, providing you don’t die within seven years. Some Long-term trusts may also incur some IHT payments over time, so it is best to get advice if you are thinking of going down this route.
- Make sure you are utilising a Junior ISA from early on, this can be cash or stocks and shares, but they cannot access it until they are 18 so a better option for University Fees rather than School Fees. However, your ISA allowance could still be utilised, investing up to £15,240 tax-efficiently.
- Consider the possibility of products with drawdown so that school fees are able to be paid at regular intervals while still benefiting from growth for the rest of the amount.
Whichever options you are considering it is best to get independent financial advice before you make any decisions. An adviser can help find the right combination for you and advise on the most tax-efficient ways of saving. To arrange a free initial financial review today give one of our team a call on 0333 456 0333 or email us at email@example.com.