When you become a parent, you will have to make thousands of choices when it comes to your children’s care, including what to do about their education. Because of the benefits like smaller class sizes, specialised programmes, and smaller class sizes, you might make the decision to send your children or grandchildren to private school. Of course, this means you need to be prepared financially for the task.
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To learn more about how to provide your family with a private education, all while bettering your Inheritance Tax situation, read on.
Average cost of private education
According to data from the Independent Schools Council, the majority of pupils attend day schools. Typically, the fee for these schools is £5,552 per term or £16,656 per annum. That could be a significant additional expense to deal with for some, but costs are, in fact, only on the rise with an increase of 5.8% from the previous year.
For one child alone, that equates to £116,592 if you choose to have your child attend private secondary schooling through the end of sixth form. And that’s not even accounting for the inevitable increases that may occur over time. If you’re considering pursuing primary or preparatory schools for your child or grandchild, the financial burden will be even greater.
How to gift your grandchild a private education
Many grandparents find themselves with the ability to alleviate the financial strain a private education might cause. Not only will you be able to help your children provide for your grandchildren, but you’ll also be able to address some Inheritance Tax (IHT) issues as well.
IHT is levied at a rate of 40% on estates that exceed the nil-rate band. Currently, the nil-rate band is £325,000, £500,000 if the property is being left to children or grandchildren.
Why gifting will help with IHT
By giving away surplus money you possess above the nil-rate band, you can reduce your tax bill. This will also help reduce the IHT burden on your loved ones.
There are implications that arise when you give outside of the exemption rules, but there is no limit on the amount you can give away. There are several strategies you can utilise such as: the yearly exemption which allows you to give up to £3000 tax-free gifts (£6,000 for a couple), to any individual; tax-exempt trusts; or the seven year rule — where no tax is due on any gifts you give if you live for 7 years after giving them — to help you provide financially for your family. Speak with your financial advisor to learn about which options are right for you.
Let us help you plan financially for your family
There are numerous benefits to a private education. If you’re thinking about funding private education for your child or grandchild, discuss it with your family then get in touch with your trusted financial advisor. The experts at Dental & Medical Financial Services can help you figure out a financial plan that will allow you to provide the funds for education and help avoid any potential IHT liabilities in the future. Contact us to explore your options today.