Pension & retirement
Fiona Ruck
In the words of civil rights activist Malcolm X: “Education is the passport to the future, for tomorrow belongs to those who prepare for it today.”
However, the price of that passport – at least in the UK – is going up.
The introduction of 20% VAT on private school fees in January 2025 has left many parents who want to send their children to independent schools struggling to make their desires match up to their finances.
But with some careful financial planning and the right advice, it is still possible for parents to purchase that passport to the future for their children.
Private school fees were 22.6% higher on average in January 2025 compared with January 2024, according to the Independent Schools Council (ISC), which represents most independent schools in the UK.
The average termly fee for a day school in January was £7,382, which includes 20% VAT, according to the ISC. In January last year the average was £6,021.
Average termly fees for boarders – where pupils live at the school during term time – are now around £9,000 a term for prep schools (for students under 11) and £11,000 a year for senior boarding schools (for students over 11).
Add in travel costs, uniform costs, learning materials and extracurricular activities and you can see why careful financial planning is needed for most parents who want to send their children to private school.
As with most life events, the earlier you incorporate private school fees into your financial planning framework, the better.
One key choice to make is whether you want to send your child to a private school throughout their educational life or whether you want to consider sending them to a high-performing state primary school followed by a private school for their secondary education. This route would give you an additional seven years to save for private school fees, although you will need to take into account the high likelihood of rising costs during that time.
Then you will need to decide whether your child will be a day pupil – living at home and going to and from school every day – or a boarding pupil living at school during term time. Day pupil rates are usually cheaper, but you will need to take into account travel times and costs and whether your child attending the school you have set your heart on could mean you potentially moving house to a home closer to the establishment.
Finally, many of the most sought-after independent schools also have extensive waiting lists so if you have your heart set on a particular school for your child, you will need to act quickly.
Plan ahead and plan early has to be your mantra for all these reasons.
Most parents pay for their child’s private school fees in three different ways:
Depending on the school and the fees charged, parents often use a combination of one or more of these primary routes e.g. using an inheritance and then topping up with amounts from their income.
If you have an investable lump sum to pay for your child’s education, you should consult a financial adviser to find out the most tax-advantageous way in which to treat that money bearing in mind how you plan to use it for school fees.
If you are planning to invest a lump sum or build up a savings pot specifically for school fees, it’s essential to ensure that the funds are invested in a way that balances potential returns with your need for capital at set intervals. A financial adviser can help you choose an investment strategy that aligns with your risk tolerance, your child’s age, and the timeframe before fees become due.
Generally, if you have several years before the fees start, you may be able to accept more investment risk in pursuit of higher returns. However, as the time to draw down approaches, reducing investment risk and increasing liquidity becomes more important to ensure the funds are available when needed.
Structuring your investments with these timing and risk factors in mind can make a significant difference in how effectively your savings support your child’s education.
If you have enough money from your income to pay for school fees, it is a good idea to ensure that source of income is protected in the event of an accident or serious illness. Financial protection policies are something you should consider in this regard.
If your child is young and you have several years before they start school, you have a number of options when it comes to saving for their education.
You could decide to put money into a savings account. Current tax rules allow individuals to save up to £20,000 a year in an ISA (Individual Savings Account) before paying tax – £40,000 if you’re a couple. However, even fixed term cash ISAs which pay higher rates of interest than instant access accounts may not keep pace with inflation, let alone the rising cost of private school fees.
Putting money into a stocks and shares ISA has greater potential to grow your money more over the medium to long term, although returns are not guaranteed and you may get back less money than you invested.
If you talk to an independent financial adviser, they will be able to ascertain your appetite for risk and work out how best to attain your investment goals whilst taking into account your overall financial situation. Again, it’s best to have these conversations as early as possible so you can weigh up all the options you have available.
Parents whose children currently attend private schools are already having to cope with the uplift in fees since VAT was introduced during the course of the current academic year.
If you’re finding it hard to make ends meet with the increased costs, there may be a number of options available to you.
For example, other members of your family – such as your parents – may be willing to help support your children’s independent education. Gifting money can potentially attract tax breaks for donors so talk to your financial adviser about the best way donations can be made to keep your child at private school.
Depending on your circumstances, you may be able to remortgage your home to release equity which could be put towards the increased cost of school fees, particularly if you have more than one child in private education.
Talk to your financial adviser about whether this is the best route for you to take and about how mortgage protection policies can help you prepare for any unforeseen events that could affect your ability to keep up repayments on a mortgage.
It’s also worth reviewing your overall financial plan to see if there are other tax-efficient ways to manage the rising costs, such as making strategic use of pensions or dividends, setting up a trust, or restructuring your savings. These approaches may help ease the financial burden and provide more stability going forward.
Engaging with a financial adviser at an early stage is a great way to prepare for paying for your child’s independent education.
Whether you’re looking at prep or senior school, day pupil or boarding, getting independent expert advice is key to facing up to private school fees and giving your child a firm foundation in life.
After all, as Nelson Mandela once said, “education is the most powerful weapon which you can use to change the world”.
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THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, TAX, OR LEGAL ADVICE. TAX TREATMENT DEPENDS ON INDIVIDUAL CIRCUMSTANCES AND MAY CHANGE. ALWAYS SEEK PROFESSIONAL ADVICE BEFORE MAKING FINANCIAL DECISIONS.
PLEASE NOTE: YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP AND YOU MAY NOT GET BACK THE FULL AMOUNT YOU INVESTED. PAST PERFORMANCE IS ALSO NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.
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