School fee plan – where do you start?

The percentage of children that are educated privately in the UK is around 6-7% according to the latest data from the Independent Schools Council. As a whole, the UK independent sector educates around 615,000 children in around 2,500 schools.

Giving children a private education is the dream of many parents and grandparents. It could be a way to boost your child or children’s career and income opportunities, which is why many parents consider a private education a valuable investment.

When choosing a UK private school for your child, you will need to take into account fees. The cost of school isn’t cheap, especially now VAT is applied. However, you’ll need to consider the quality of teaching, small classes, high level of care and supervision, school trips and often excellent academic facilities when weighting up the costs.

How much does private school cost?

The election of a Labour government in July 2024 and the decision to apply VAT at 20% on independent schools’ fees from 1st January 2025 has significantly increased the cost of private school fees. The below figures exclude VAT as the schools completing the 2025 Independent School Council Annual Census survey were asked to record their fees excluding VAT.

Fees vary widely from school to school. But the 2025 Independent Schools Council (ISC) Annual Census revealed that the typical average fee for pupils attending day schools is £6,152 per term or £18,456 per annum excluding VAT, a rise of 1.9% on 2024. The total average cost of an independent education in a day school over five-year period is around £92,280, and when including VAT, this rises to £110,736. These figures do not account for future price increases either.

How to fund private school fees

One in three private pupils receives fee assistance, for example through scholarships, bursaries or charitable trusts. Some schools also offer the option of paying a lump sum upfront to receive a discount on future years’ fees.

For those without the necessary funds, you will need to take into account the following:

• When you are likely to start paying fees
• Your current and future number of children
• The estimated level of fees and increases
• Your current and future level of income

Here are five tips to help plan with school fees

1. Review your investments

Tax planning and making investments go hand in hand when considering how to save for school fees. You also need to consider your general attitude to investment risk, your current tax status and how this might change. You’ll also need to think about whether your preference is to invest a lump sum, a monthly amount or a combination of the two.

When investing, in the first instance you may well need to consider whether investment risk is necessary and whether you are comfortable with it. Sometimes a cash-based savings arrangement can work quite well, especially with current savings rate keeping pace with inflation.

To maximise returns and minimise risk, you would ideally need to hold a well-diversified portfolio across the major investment types; UK and international shares, fixed income, property and commodities. Spreading the money across these different investment assets is the best way to reduce volatility without limiting the potential for a reasonable return.

In a less certain environment, you may wish to consider holding at least three years of school fees in easily accessible cash, with the balance of the cash invested.

2. Use tax wrappers

Utilising any available tax wrappers can be part of school fees planning if they are not earmarked for something else. For example, you can invest as much as £20,000 a year in a stocks and shares ISA – so £40,000 for a couple. This can provide a very effective tax-free wrapper for a portfolio designated to meet school fees.

The use of an accumulation and maintenance trust and any available capital gains tax allowance for both parents and children are also two key planning points to consider.

3. Consider your mortgage strategy

It is also possible to consider offset mortgages and re-mortgaging to raise the funds for private education. After all, most people do not have hundreds of thousands of pounds saved up to cover the cost of private school fees. With the rise in house values over the years this can often be a useful option, especially if mortgage rates decline in response to the Bank of England gradually starting to reduce interest rates.

The problem is you have to pay back the sum released, plus the added interest, meaning this will generally cost much more over the longer term. Having said this, with the possibility of a better salary in the future, this might be something to contemplate.

4. Speak to Grandparents

Often, there is a discussion with grandparents where they wish to help fund school fees, due to the benefits of inheritance tax (IHT) savings.

IHT is not incurred by those who contribute a regular amount from their income, assuming the money donated does not affect the lifestyle of the donor and thus force them to use savings. If grandparents use their accumulated wealth to provide a regular income, then they can gift from this free of any IHT issue.

Alternatively, a lump sum is free from IHT if the person making the gift survives for seven years. If grandparents provide a lump sum then parents can decide how to invest it. Alternatively, there may be trust-based solutions that can provide reasonable, tax-efficient funding.

Read more: Private school fees: a way to reduce your inheritance tax?

5. Review protection policies

It is important to remember to review life, critical illness and income protection insurance. Should you unexpectedly die or be unable to work through illness or injury, the financial planning for your children and their education could be jeopardised. Having in place the appropriate level of cover can offer reassurance and peace of mind for the future if anything were to happen.

It is important to plan ahead and take appropriate tax and financial planning advice to ensure you consider the various options to help secure your child’s future.

Guide to Investing for Children

Whether it is saving for school or university education, or to provide a deposit on a first home, giving your children or grandchildren a good start in life is among most people’s top priorities.

Find out how to invest for children