Member Article

The true cost of funding a private education!

Leading Financial expert Louise Oliver, of Piercefield Oliver, explores the price of private edication and what it will mean to your family

MY children are lucky enough to attend a good state school in a nice area and seem to be doing very well and, above all, they are happy

Although many of the independent schools have found it tough during the economic slowdown there are still plenty of parents who are willing to stump up the fees to pay for private education.

Once you are on the private education ‘band wagon’ this is a very large financial commitment and planning ahead is sensible.

Also, if you do it for your first child it follows that you feel obliged to fund the others – and the unknown sometimes is how many ‘others’ there might be!

If you have wealthy parents or grandparents with a potential inheritance tax bill to mitigate and they are willing to help out this can be a wonderful way of funding the school fees, partly or in full.

If there is scope for them to fund this out of excess income it is an excellent tax planning strategy for reducing estate duties.

Under current legislation gifts out of normal income are immediately exempt from inheritance tax provided that the individual making the gift does not alter their lifestyle as a result.

Grandparents can establish savings or investment accounts designated to their grandchildren.

This is very tax efficient as the funds are then taxed on the child not the grandparent.

If parents do similar then it is taxed as if it is the parents at their appropriate rate of tax so this often is not very tax efficient.

The big question, of course, is how much is it going to cost?

The cost of an independent education is a major factor in the decision making process and for many parents meeting that cost involves sacrifices and changing priorities. School fees vary enormously from school to school and will increase as the child moves through the school.

There may be extras such as school meals, after school clubs, school trips and entrance fees for public examinations so this should be taken into consideration when choosing which school you can afford because extras can be anything up to another 10 per cent on the school bill. If you are intending to send your child to an independent school, it is important, from a financial point of view, to plan in advance.

There is also inflation to factor in to the planning and school fees tend to increase on average in excess of annual inflation.

Schools have had to suffer the impact of less children attending, increased staffing costs and high energy bills in what can often be energy inefficient buildings.

The projected figures are eye watering which is why it is important to plan ahead and consider the most tax efficient way of funding now and into the future.

Savings vehicles to consider are ISAs, both cash and investment depending on when the monies are required and attitude to investment risk.

Also annual capital gains tax allowances (currently £11,000 per individual) can be an effective way of realizing profits on investments and minimizing taxation.

They say that you can never take away your children’s education but what parents have to decide is if they can afford it without killing themselves in the process!

For more information contact louise.oliver@piercefield.co.uk tel: 01246 269400 www.piercefieldoliver.co.uk

Piercefield Oliver is a trading name of Piercefield Asset Management Ltd, which is authorised and regulated by the Financial Conduct Authority. Our FCA registered number is 402963.

This was posted in Bdaily's Members' News section by John Highfield .