How to save and pay for private school fees

If you want to send your children to private school, you should start planning early.

Unless you’re lucky enough to get a windfall, you’ll probably need to save and invest wisely to keep up with the rapidly rising cost of fees.

Learn how many parents save for private school fees below.  

Giving your children the best education comes at a cost. 

With smaller classes, more focus on one-to-one teaching and an array of extracurricular activities, private schooling can enrich your child’s learning – not to mention increase their chances of achieving potentially higher grades. 

For most UK parents, giving their child a private education is out of the realm of financial possibility. 

Aside from exploring bursaries, scholarships and grammar schools (if you have one in your area), you will have to fork out if you want your child to be privately educated.

There is no getting around it, but there could be ways to prepare for school fees in a more financially savvy way.  

How much do private school fees cost? 

School fees have soared since the introduction of VAT on school fees in January 2025. 

According to the Independent Schools Council, the average fee for an independent day school is currently £7,382 per child per term, 22.6% higher than the same period last year.

School fees tend to increase at a higher rate than inflation, so it may get more difficult to send your children to private school. Finding ways to bring down the cost is crucial for many families. 

When should you start planning for private school fees? 

This question has a simple answer: as soon as possible. 

You may need to save a significant amount, so it’s important to put money in the pot early. 

It’s also worthwhile having a savings goal in mind. Do you want them to go to prep school, an independent secondary school or a private sixth form? And will you need them to board if your preferred school is far away? Have you included the cost of trips? 

Once you know the private school fee costs, not only can you get a savings strategy in place, but you can think sensibly about whether or not you can afford it. 

Although your child’s education might be your priority now, you don’t want to sacrifice your retirement savings and ability to make ends meet. 

Are private school fees tax deductible? 

You can’t use school fees to offset your tax bill, but there are other ways to pay and save for private school more tax efficiently. 

There are two options to make sure the payments from grandparents are tax-free: 

• Make regular gifts from surplus income to make sure gifts won’t be caught in the IHT net.

• Set up a trust – when the grandchildren are named as the beneficiaries, any money the trust earns will be owned by the children, meaning you can use the children’s income tax allowance. You need tax advice as the trust needs to be carefully drafted, and there may be additional IHT to pay when you set it up.

• If the grandparents run a business, they could consider gifting shares to the grandchildren, so they become shareholders. Income from dividends, which may be charged at a lower rate, could be used to fund school fees. 

These scenarios can be very effective, but they are complicated to set up, so you should get advice before you go down this route.

How to avoid IHT on gifts from grandparents

Gifts from grandparents can be caught in the inheritance tax (IHT) net if they die within seven years of making the gift.

But using the IHT gifting rules can make sure that any gifts are excluded from their estate, even if they die within seven years.

Here are two of the main IHT exemptions - gifts made using these rules are exempt from IHT, even if you die within seven years.

• Using the IHT annual allowance allows someone to give gifts of £3,000 each year and put them immediately outside their estate for IHT.

• Regular gifts made from surplus income are also exempt from IHT, even if the individual dies within seven years  - they need to keep records to show the gifts were from excess income that wasn’t needed.

Can you use investments to pay for private school fees? 

Absolutely. Unless you have a very high income – and one increasing at the same pace as that of private school fees, it is unlikely that you’ll have enough spare cash to pay for the fees unless you’ve made some investments. 

Using a stocks and shares individual savings account (ISA) to invest means any profits generated are tax-free, so you get to keep more of any investment gains.

There is a range of investment options, including equity and bonds. Both can fluctuate over time but tend to beat inflation and cash interest over time.

It’s a good idea to keep a cash reserve to pay for fees during the next five years, to cushion the impact of a downturn in the stock market.

Other ways to manage private school fees

Investing isn’t the only way to get the cash you need to pay for school fees.

You could borrow money, and lots of parents remortgage or use offset mortgages to release money.

Be aware that any money you borrow will need to be repaid, and you’ll have to pay interest on it.  

You should also consider taking out insurance. The likes of life insurance, critical illness cover, and income protection will help to pay for school fees should anything happen to you. 

If private school is on your wish list, a financial adviser can help you get a plan in place that works for your finances and other life plans.

If this article is relevant to you, it might also be helpful for you to know more about financial coaching. What is a financial coach? We’ve got the answers.