School Fees - you need to start planning early

The cost of sending a child to private school has risen by around 40pc since 2007, according to figures from the Independent Schools Council. Between 2007 and 2008, the average fee rose by 10pc a term for a private boarding school, soaring above inflation, which was 3.6pc in the same period. Since then, private school fees have risen by around 5pc each year, still well above the average increase in the cost of living.

If its worrying you the best thing to do is start early, based on a monthly savings programme, parents will need to invest at least £200,000 per child on average across 18 years, assuming they will pay private school fees from junior level to sixth form. "The earlier you can start, and the bigger sums early on, the better, as time is on your side and the regular amounts can reduce over time as the investments grow," said Jason Hollands the broker, who calculated the figures.

Grandparents often step in to help with grandchildren's school fees, which can have the added benefit of reducing an inheritance tax liability. Each grandparent can make a gift of up to £3,000 a year that is exempt from inheritance tax. This figure can be carried forward for one year, so a grandparent could give £3,000 for 2012-13 and again for 2013-14 but not for previous years.

There is also an exemption called "normal gifts out of income". Patricia Mock of the accountancy firm Deloitte said grandparents could make gifts from their disposable income that was fully exempt as long it did not affect their standard of living. Any other gifts were "potentially exempt transfers" which means you must survive seven years for them to be completely free of IHT. Grandparents could also set up a trust for their grandchildren, but this requires additional administration.





If you would like any advice on how much you are allowed to give to your grandchildren, then why not give our team of IFA's a call.




Issued by: Enable Independent Financial Life Planners
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