18th December 2023
High cost of private education
THE SIGNIFICANT DECISION OF CHOOSING A PRIVATE SCHOOL FOR CHILDREN
Choosing the right educational path for your children is one of the most significant decisions you will make as a parent. Among the many considerations, private schooling often emerges as an option due to its perceived benefits, such as smaller class sizes, specialized programs and personalized attention.
However, the high costs associated with private education can make this decision even more complex. Data from the Independent Schools Council reveals that the majority of pupils attend day schools, meaning the typical fee level is £5,552 per term or £16,656 per annum, a rise of 5.8% from 2021 to 2022.
This equates to a hefty total of £116,592 per child for those who opt for private secondary schooling through the end of sixth form. And these figures don’t include potential increases in fees over time. The financial burden can be even greater if considering private primary or preparatory schools.
EASING THE FINANCIAL BURDEN:
ROLE OF WEALTHY GRANDPARENTS
However, grandparents have the capacity to alleviate this financial strain on their adult children while simultaneously addressing a looming Inheritance Tax (IHT) issue.
INHERITANCE TAX: A GROWING CONCERN
UK families are increasingly feeling the pinch of IHT when family members pass away. In the fiscal year 2022/23, IHT receipts touched a record high of £7.1 billion, according to HM Revenue & Customs (HMRC) figures, an astounding 108% increase over the last decade. Presently, IHT is levied at a rate of 40% on estates exceeding the nil-rate band, which stands at £325,000, or £500,000 if the property is being left to children or grandchildren.
NAVIGATING IHT: ROLE OF GIFTING
One method of reducing your loved ones’ IHT burden is to start giving away surplus money. The less money you possess over the nil-rate band, the smaller the tax bill. For grandparents, contributing to school fees can serve a dual purpose: reducing your IHT bill and witnessing your grandchildren benefit from your wealth.
With IHT gifting rules, implications arise when gifting outside of the exemption rules. However, there are no limits on the amount you can give away. Here are several allowances you can leverage, whether you’re paying the entirety of the school fees or making a contribution.
Yearly exemption: Every year, you can contribute £3,000 tax-free to any individual of your choice. Couples can unite to offer a combined tax-free gift of £6,000. Moreover, you can carry forward the unused portion from the previous year, although this can only be done once. This yearly exemption can also be paired with a donation from surplus income and given to the same recipient.
///CONTINUE READING THIS BLOG ON PAGE 09 (CLICK HERE)///
[1J /SC Census and Annual Report 2023.
[2J Kttps ZZZ.statLsta.FoP statistics/284325/united-kingdom-hmrc-tax-receipts-inheritance-tax/
THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE VALUE OF YOUR NVESTMENTS (AND ANY NCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.