We all want to give our children the best opportunities in life. For many parents, this means paying for a private school education, so school fees planning is critical. Independent schools tend to offer a first-class educational experience designed to help students reach their full potential, and research shows that the majority of students who attend these schools outperform national averages academically and continue on to top universities¹.
However, the costs associated with a private school education can present challenges for many people, even those on high incomes. According to the 2024 Independent Schools Council (ISC) Census and Annual Report, the average fee for an independent day school in the UK is now £6,021² per term, with the figure rising to £7,334 per term for day schools in London. These figures are before extras such as uniforms, lunches, and excursions, which can push the costs up further.
If there’s one takeaway here, it’s that those wishing to send their children to a private school should prepare for the fees well before they are due. With that in mind, here is our quick guide to school fees planning.
Understand the cost of private school fees
The first step, when planning for school fees, is to budget in advance to understand the extent of the costs you’re likely to face.
It’s worth noting that private school fees are constantly rising. From the 1st January 2025, private school fees are now being charged VAT at the standard 20% rate. Although schools may not have increased fees by that exact amount, it is crucial to factor this level of school fee inflation to your budget.
If you have two or three children at private school at once, you could potentially be looking at fees of £60,000 to £80,000 per year, so it’s important to think about how you will generate this kind of liquidity. Running a cash flow model at this stage could be useful to understand how you will handle the expense.
Save and invest for private education fees
The next step is to start putting resources aside to build up a savings pot. Here, it’s smart to consider putting a regular savings plan in place. The earlier you do this the better, as it can give you more time to compound your savings.
At this stage of the process, you can give some thought to the best asset allocation for your school fee savings. This will largely depend on your time horizon. Typical investment planning would use lower-risk investments such as high-interest paying investments if your children’s school fees will be due in the next few years higher risk equities and commercial real estate if a longer period is possible.
If you are unsure about the best asset mix for your investments, it’s a good idea to speak to a financial planner or investment manager. A planner can assess your savings requirements and help you construct a portfolio that suits your needs, objectives, risk level and time horizon.
Use tax-efficient strategies for school fees
When planning for school fees, parents should also think about saving and investing for school fees tax-efficiently. In the UK, the difference between pre-tax and post-tax investment returns can be substantial, especially for high earners, who face high tax rates on both capital gains and income. Fortunately, there are various ways to reduce tax for high income earners.
One strategy for parents to consider is saving and investing into a Stocks & Shares ISA. Within an ISA, all capital gains and income generated are tax-free. Meanwhile, money can be accessed at any time, meaning that parents can make penalty-free withdrawals whenever school fees are due. At present, every adult in the UK has an annual ISA allowance of £20,000 per year.
Involve grandparents in school fees planning
It’s worth pointing out that grandparents who wish to help with school fee expenses can also do so in a tax-efficient manner.
Lump-sum and regular gifts, including direct payment of school fees, can help reduce the value of the grandparents' estate to reduce future Inheritance tax (IHT) payable — provided that full use is made of the IHT exemptions. Currently, each grandparent can make gifts of up to £3,000 per tax year under the annual exemption. In addition, regular gifts out of surplus income may also be exempt, if they meet the specific conditions set by HMRC. Gifts of any amount may be exempt from IHT if the grandparent survives for more than seven years from the date the gift was made, subject to a review of all paid gifts. They must follow all relevant IHT rules to ensure the tax does not apply.
When school fees planning, establishing a ‘bare trust’ is another strategy for grandparents to also consider. With this type of trust, assets are effectively held by the grandparent as a ‘trustee’ for the benefit of the grandchild who is the trust’s ‘beneficiary’, and assets are taxed as if they belong to the grandchild. This means that grandparents can take advantage of the grandchild’s annual personal tax allowance, which is currently £12,570.
How Bowmore can help with school fees planning
At Bowmore, we understand the challenges you face with this area of financial planning. We can assist you in tackling them. Want to find out more about tax-efficient school fees planning? Get in touch with us today.
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• The Financial Conduct Authority does not regulate Estate Planning or Inheritance Tax Planning.
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[1] Independent Schools Council, 2019
[2] Independent Schools Council, 2024
[3] The House of Commons Library, 2025