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Placing children in private school can be a substantial financial commitment for parents for many years. With average school fees in the UK now being around £14k per annum, the total commitment can be considerable over the course of a childs education.
Even for Ultra High Net Worth Individuals where school fees are unlikely to be a financial burden, steps can be taken to bring wealth management benefits.
A structured approach to school fees planning can reduce tax liabilities.
If you are the owner of a family business, you would be able to utilise a family business trust for payment of family expenses such as school fees.
Utilising these arrangements, the profits of the business can be used to tax efficiently pay school fees and other related expenses. This is done by making use of the childs tax free allowances (such as their personal allowance and dividend allowance).
This is an attractive solution where parents owns shares in the family business and grandparents (or perhaps other family members) want to assist in paying school fees.
At ETC we have extensive experience in setting up family business trusts which enables expenses to be paid whilst making use of their tax-free allowances. This can lead to a considerable tax saving as opposed to parents funding school fees from post-tax income after deduction of higher and additional rates of tax.
Family business trusts are part of our wider tax advisory service for entrepreneurs and families and are used in conjunction with other planning structures to preserve and protect the longevity of family wealth.
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