With one school year almost finished and summer holidays ahead it's time to start planning for “back to school”. For many parents this includes how to best pay for the rising cost of private school fees – and for many, your children’s education is probably the second most expensive expenditure in your life, after of course, the family home.
What is the problem?
Personal expenditure such as school fees will usually be paid out of taxed income. However, this does come at a cost and for a company director, for example, the actual cost can often be 48% more (based on a higher rate taxpayer paying 32.5% dividend tax) According to a recent report, the average total cost to educate your child at an independent school was £110,000 for secondary school including sixth form (11–18). Following the example, and without tax planning, the true cost of that education becomes £162,800!
So what is the answer?
One of the beauties of living in the UK is that children have a tax-free allowance currently worth £12,570 per year (tax year 2021-22) – the same as everyone else. And for company directors and business owners, this can open up opportunities for tax planning.
At Oldfield Advisory we have developed a solution called the “Family Wellbeing Trust”. We developed this specifically for:
- Providing a tax-efficient income for a child
- Paying for school fees tax efficiently
- Passing wealth from one generation to another without losing control
- Supporting needy welfare situations tax efficiently
Trusts and taxation are very specialist areas. Oldfield Advisory are leaders in this field and will help you to avoid the pitfalls.
If you would like further advice or an explanation of how you can pay school fees tax efficiently and/or provide a child with a tax-free income, then please contact our team for further assistance.
Please note: This report is provided for information only and was correct as at time of writing (12/07/21). Lists and details provided above are not exhaustive and not intended to be full and complete tax guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.