The soaring cost of private education – and how to survive it

Increasingly, sending a child to private school is a luxury available only to the very wealthy. Someone starting their child at a private day school today can expect to part with around £380,000 to age 18 – and around double that for boarding school. Ambitious parents need to resign themselves to the reality that a gold-plated education is expensive. 

The hidden costs of inflation and VAT

There is also the problem that parents don’t quite know how much they are signing up for. The £380,000 calculation assumes inflation at around 3%, but the reality has been far higher in recent years. Someone whose child has left private school this year will ‘only’ have paid around £205,000. 

While the chief executive of the Independent Schools Council responded to the research by saying: “Schools will always do all they can to keep fees affordable for parents,” in reality, many private schools do not. All too often, schools become embroiled in a facilities arms race and expect parents to foot the bill. 

The VAT is also a consideration. Rathbones Group has estimated that parents will pay up to £111,300 more per child over their school life because of the imposition of VAT on fees*. The government also looks likely to claw back VAT from parents who paid in advance. 

All in all, it’s expensive and there’s a lot of other things you could do with that money: buy yourself two Maseratis, a four-bedroom house in the Dordogne, retire a decade early. However, children need to be educated somehow and many of us continue to sign up to the ball and chain that is private education. For the masochists who are just starting out, and the weary folks who are part way through, there are a handful of ways to make it more affordable. 

Making school fees more affordable

The primary goal is to ensure school fees are not paid in full from earned income every month. People lose their jobs, the roof falls in, and paying for education pay cheque to pay cheque is stressful. Among the very few things that can make private education more affordable are compound interest, tax savings and investment growth. That means starting saving as early as possible, investing wisely in a tax-efficient way. 

Starting early also applies to any involvement from grandparents – gifting to grandchildren is a highly effective inheritance tax mitigation tool. As the rules currently stand, if those making the gift live for at least seven years after it is made, it will be out of the inheritance tax net and tax free in your hands. Even if they start later, the annual £3,000 gifting allowance is available every year, and will help with the cost (particularly if you can get both sets of grandparents involved). Encouraging grandparents to start at birth rather than when children start school can help build up the pot ahead of time. 

Using an ISA wrapper for any saving is a no-brainer. If you can get going early in an ISA, you can build up a nice tax-free income stream that doesn’t have to be declared on your tax return. Note, parents can’t take money out of a Junior ISA, so these are not the right vehicle for school fees, but can be useful for university tuition. 

Another option is to set up a trust, though the tax advantages have diminished in recent years. A bare trust can be set up by an adult to invest on behalf of a child. The child owns the assets at the age of 18, but the trustees can move or withdraw money before then to use for the benefit of the child, including for educational costs. Because income over a certain level is taxed as the parents income, rather than that of the child, these trusts tend to work better for non-income generative assets and for grandparent contributions. 

Where should you invest? 

If you have five years or more until you need to access the money, you can use stock market options. Most parents won’t want to take too much risk, so a global equity income fund such as Fidelity Global Dividend or JPM Global Equity Income can be a good option. The income on these funds should grow ahead of inflation, which helps manage fee rises. If you have less time to invest, more cautious options include Ninety One Diversified Income or Aegon Diversified Monthly Income. If you have less than three years to invest, you’re probably stuck with a cash option and shopping around for the best interest rate. 

A final point – while private school fees can seem horribly steep, it is worth remembering that there are costs to the alternatives. Moving to a decent catchment area also comes with expenses: stamp duty, higher house prices, commuting costs. You need to factor these into any calculations. There is no silver bullet to private school costs. It’s going to hurt. However, planning ahead and tactical saving can help minimise the pain. 

*Source: The Times, 13 August 2025