Planning for school fees: A parent’s financial guide

As the academic year draws to a close, many parents will be using the summer break to plan for their children's futures. For a good number, that will involve taking into account the changes to private school VAT. Here, Fiona Ruck, an independent financial adviser at Fairstone, a leading wealth management firm in the UK and Ireland, highlights how planning early can put parents in the best possible place to provide their children with a passport to the future.

There are few things in life more important than a good education.

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 – in the UK, at least – is going up.

The introduction of 20 per cent VAT on private school fees has left many parents struggling to match their desires 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.

How much does private school education cost?

Private school fees were 22.6 per cent higher on average in January 2025 compared with January 2024, according to the Independent Schools Council (ISC).

The average termly fee for a day school in January was £7382, which includes 20 per cent VAT, according to the ISC.

In January last year, the average was £6021.

Average termly fees for boarders – where pupils live at the school during term time – are now around £9000 a term for prep schools (for under-11s) and £11,000 a year for senior boarding schools.

Add in travel and uniform costs, learning materials and extracurricular activities, and you can see why careful financial planning is needed for most parents.

When should I start planning for paying private school fees?

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 and 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 consider the likelihood of rising costs during that time.

You will then 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 consider travel times, costs and whether attending the school you’ve set your heart on could potentially mean moving house.

Many of the most sought-after independent schools have extensive waiting lists, so you will need to act quickly.

Plan ahead and plan early must be your mantra.

How can I pay for private school fees?

Most parents pay for their child’s private school fees in three different ways:

· via a lump sum – potentially an inheritance or a gift from a family member – which they can invest

· via their income

· via a regular savings plan

Depending on the school and the fees charged, parents often use a combination of one or more of these primary routes.

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 to treat that money.

If you are planning to invest a lump sum or build up a savings pot specifically for school fees, it’s essential to ensure 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 here.

How can I save for private school fees?

If your child is young, and you have several years before they start school, you have a number of options.

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 before paying tax, and £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 while considering your overall financial situation.

How can I keep my child in private school?

If you’re finding it hard to make ends meet with the increased VAT costs, there may be a number of options available.

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 a 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.

Talk to your financial adviser about this 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 use of pensions or dividends, setting up a trust or restructuring your savings.

How can a financial adviser help?

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 you can use to change the world’.

We’re here to help

For more information on how Fairstone could guide you through the school fee landscape, click here, visit its website or call 0800 884 0840.

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.

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 NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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