Planning for the Costs of a Private Education: A Grandparent’s Guide

Planning for the Costs of a Private Education: A Grandparent’s Guide

Recent changes to the tax treatment of school fees have brought private education firmly back into the spotlight.

With the introduction of VAT on private school fees, it has never been more important for families to consider the full cost of private education and how to fund it. While this change adds complexity, private education remains a vital and attractive alternative to state education for many families – particularly those who value choice, continuity and long-term opportunity.

For grandparents keen to support the next generation, this has prompted renewed conversations about how best to plan ahead, often from a very early stage.

At Smith & Pinching, we regularly help clients plan for their grandchildren’s education, sometimes starting from birth. Done well, this type of planning can be both tax-efficient and deeply rewarding.

Why families still value private education

Despite rising costs, many hard-working families continue to consider private education because of the benefits it can offer, including:

● Smaller class sizes and individual attention

● Broader extracurricular opportunities

● Strong pastoral care

● Academic consistency and continuity

● Access to facilities and networks that may not otherwise be available

For many families, private education is not about elitism, it’s about choice, opportunity and giving children the best possible start.

Understanding the true cost of private education

Before fee planning can begin, it’s important to understand the scale of the commitment.

While fee plans vary widely by region and school, average UK private day school fees are now in the region of £15,000–£18,000 per child, per year*, with boarding schools significantly higher.

Over the course of a full private education (for example, ages 5–18):

● One child could cost £250,000–£300,000+

● Two children could comfortably exceed £500,000

Compounding this challenge is the fact that private school fees have historically risen faster than inflation, often increasing by around 4–6% per year over the long term.

This is why early, structured planning matters.

Why grandparents are increasingly involved in fee planning

Thanks to financial stability, grandparents are often in a strong position to help:

● Their own financial position may be more secure

● Children and grandchildren are still young in life

● Planning horizons are long

● Tax planning opportunities are broader

Importantly, support doesn’t need to involve writing cheques every term. With the right structure, grandparents can help in a measured, tax-efficient way that protects both their own financial security and their wider estate.

Planning strategies to consider

1. Using annual exemption gifts

Each individual can gift £3,000 per tax year (plus unused allowance from the previous year).

While modest on its own, when used consistently and combined between grandparents, this can meaningfully contribute towards future family investment.

2. Gifts out of regular income

Gifts made from surplus income — rather than capital — can fall immediately outside the estate for inheritance tax purposes, provided certain conditions are met.

For grandparents with excess income, this can be one of the most powerful and underused tax planning tools, particularly when supporting regular costs such as education.

3. Using pension income for financial planning

Following recent changes to pension and inheritance tax rules, pension income is increasingly being brought into wider planning conversations.

If pension income exceeds spending needs, gifting surplus income towards grandchildren’s education can:

● Reduce inheritance tax exposure

● Put income to immediate, positive use

● Support family goals without impacting lifestyle

As always, this must be carefully documented and planned with your financial adviser, who will provide expert advice.

4. Trust planning: discretionary or bare trusts

Trusts can play a useful role, particularly where:

● Control is important

● Multiple grandchildren are involved

● Funds have been set aside for many years in advance

Bare trusts are often used for simpler arrangements in which funds ultimately belong to a specific child.

Discretionary trusts offer greater flexibility and control, allowing trustees to decide how and when funds are used, which can be helpful where future circumstances are uncertain.

Trusts are powerful but complex, and professional advice is essential.

5. Creating a dedicated school fees investment plan

Perhaps the most important step is building a clear, purpose-led investment plan.

This involves:

● Understanding each child’s age

● Estimating annual fees and fee inflation

● Calculating how long funds need to last

● Determining how much needs to be set aside

● Assessing what level of investment return is required

From there, investments can be structured appropriately — balancing growth for younger children with capital protection as fees approach.

This avoids guesswork and ensures expectations are realistic from the outset.

A final thought about family investment

Private education is a significant financial commitment, and with rising fees and tax changes, it deserves careful wealth management.

For grandparents, the opportunity to support grandchildren in this way can be hugely meaningful — but it must sit comfortably within a wider financial plan. Decisions driven purely by emotion or tax can lead to unintended consequences and put your loved ones at risk.

With the right structure, clarity and professional guidance, planning for private education can be both manageable and tax-efficient, while giving the next generation a valuable head start.

*Independent Schools Council (ISC) Census 2025