How to manage higher private school fees

The addition of VAT has seen one in 10 wealthy parents remove their child from private school and 68% make financial sacrifices to keep them in, one year on from the rule change, according to new research.

Nearly two thirds (65%) of 1,167 parents with at least one child at private school who were surveyed say they have had to make significant changes as a direct response to last year’s addition of VAT to school fees, the poll by wealth manager Saltus found.

Of these, around one in four (23%) have removed their child from their current private school. Some have kept them in private education by either moving them to an alternative, less expensive, private school (8%) or to a private school abroad (6%), while others have been forced to remove them from the private school system altogether, either into state school (6%) or to home school them (3%).

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In addition to those parents who have already taken action, many others plan to. Around one in five (22%) intend to remove their child from their current school: 4% into state school and 3% to home school, while the rest plan to choose a cheaper private school either at home (8%) or abroad (6%).

The survey quizzed 2,000 UK-based high net worth individuals (HNWIs) aged over 18 with £250,000 or more in investible assets (not including their primary residence).

Mike Stimpson, partner at Saltus, said: “For many HNWIs, paying for their children’s education remains a major aspiration, but the additional cost has forced a reassessment of what is affordable, what is sustainable and what truly represents value over the long term.

“Many value private education highly and are prepared to make sacrifices to make it work, even in the face of rising fees and the additional impact of VAT.”

Some HNW parents, though, are more pragmatic, Stimpson continued. “Some question whether private education is always the right default choice, particularly where there are strong grammar or state schools locally.

“Others are comfortable with the idea that investing money for a child’s future – whether through property, ISAs or other long term vehicles – may deliver greater flexibility and value than school fees alone,” said Stimpson. According to the survey, almost six in ten would prefer one of these options if they were compelled to choose.

“This is an important issue to many people, not simply about affordability. It’s about values, priorities and perceptions of return on investment,” said Stimpson.

How much does private school cost?

The average cost of sending a child to a private day school soared to £7,832 per term when VAT was introduced in January 2025. This figure is 22.6% higher than in 2024, based on data from the Independent Schools Council (ISC). The rise takes into account other cost increases as well as the VAT policy.

It means parents have to find an additional £1,361 per term, on average, or £4,083 per year. Those with more than one child in private school have seen their bills rise by even larger sums.

ISC chief executive Julie Robinson told the BBC last year that private schools have been hit by a “triple whammy” of National Insurance changes, an end to charitable business rates relief and 20% VAT.

Some schools have attempted to cushion the blow by reducing their underlying fees before VAT is applied. ISC data shows schools cut their underlying fees by 5% between September 2024 and January 2025 in preparation for the VAT policy coming into effect.

Despite this, parents could see costs rise even further over the years to come.

“I’m sure sending out invoices with VAT on was a nail-biting moment for some heads, who would have been nervous about losing pupils,” said Oliver Barnett, head of private clients at Weatherbys Private Bank.

“As things settle over time, it would not surprise us to see management attempting to recover some of the discount they applied in January. Research from Weatherbys shows that schools have historically increased fees by above inflation.”

Fees tend to rise each year in September at the start of a new academic year. Even before the government’s VAT policy kicked in, ISC data shows fees increased by 8% in 2024 and 5.6% in 2023.

Based on ISC data and assuming annual fee inflation of 3% – a relatively conservative estimate – Weatherbys has calculated that parents can expect to pay £377,000 in fees over the course of their child’s full education.

This assumes the child is enrolled in a reception class at a private day school this September and remains in private education until finishing their A-Levels.

“The key thing is to be realistic about the costs of private education from the start and to make robust, well-thought through plans with your adviser,” Barnett said.

We share six tips on how to manage higher private school fees, as well as outlining ways to plan for the future if you are thinking about enrolling your child.

1. See if grandparents can help

The majority of families (65% according to think tank Civitas) receive help when paying private school fees. Of this group, 30% have received a gift from family or friends, and 13% a loan from loved ones.

Many grandparents contribute towards the cost of a private education if they can afford to do so, with some seeing it as a good way of giving their grandchildren an early inheritance while they are still around to see the benefits.

Make sure you read up on the tax implications, though, as any money that is contributed by grandparents is likely to be classified as a gift for inheritance tax purposes.

This means you could end up having to pay 40% inheritance tax on the money, if the grandparent passes away within seven years of paying the fees, and their overall estate exceeds the tax-free allowance (known as the nil-rate band).

There are some exceptions, for example, gifts made out of surplus income are not subject to inheritance tax, no matter how large the amount. However, to qualify, the gift giver must be able to prove the gift has come from income rather than capital. Furthermore, the gift must not impact their quality of life.

If you are thinking about asking family for help, it is best to raise it with them sooner rather than later so they can factor it into their financial plans.

2. Consider the true cost of a loan

Families who are struggling may consider borrowing money to cover private school fees – particularly to avoid pulling their child out of school in an important exam year – but it is important to be mindful of the cost of interest.

“Some people will take a personal loan, some will remortgage their house and some will use monthly payment schemes set up by the schools. This adds interest to the huge costs involved,” said Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown.

“In the case of monthly plans or personal loans, you might pay interest at around 6% or more. If you use a personal loan and borrow over more than a year, the cost of each subsequent loan will pile the pressure on even further. If you remortgage, the rate might be lower, but because you’re repaying for longer, the overall costs will be far higher.”

These routes are better avoided if possible.

If you do decide to remortgage to free up some capital, it could be worth looking at an offset mortgage. This type of mortgage is linked to your savings account and can help reduce the amount of interest you pay.

For example, if you have a mortgage of £100,000 and a linked savings account with £10,000, you would only pay interest on £90,000 of your mortgage – equivalent to a 10% saving.

Coles points out that keeping the school fee money in the linked savings account means you wouldn’t pay interest on it until you started drawing the money to pay the school. “You can also top the account back up if you get any windfalls, in order to bring interest payments down again,” she said.

3. Think carefully before moving house

Some parents say they have considered moving house as a result of higher private school fees. Some plan to relocate to a local authority area with better state schools, while others plan to move closer to another private school that has lower fees. Downsizing is also an option, if you want to funnel the money from selling your house into your child’s education.

However, it is important to remember that moving house comes with a heap of hidden costs. According to exclusive figures from comparison site Reallymoving, the total average cost of moving house in the UK is £15,978 when you include conveyancing costs, survey costs, estate agent fees, stamp duty, removal costs and EPC costs. This has surged 14% compared to last year, largely due to higher stamp duty costs.

It is important you take this into consideration when weighing up any savings, as this sum could go a decent way to covering a year’s worth of fees.

4. Apply for bursaries, scholarships and discounts

Some schools offer discounts for siblings and the children of staff members. You might also qualify if you work in a particular job, such as the clergy or armed forces. For families that are struggling, there are sometimes hardship arrangements and bursaries that might be of assistance too.

Another thing that’s worth finding out is whether there are any scholarships on offer. You may be able to access one if your child excels academically or in an area like sport, art or music.

5. Invest for the future

If you don’t currently have children in private school but are planning for the future, you could consider investing some money. You would need a decent time horizon ahead of you to ride out any short-term volatility though – ideally five to 10 years.

If you deposited £10,000 in a stocks and shares ISA on the day a child was born and managed to achieve an average return of 6% per annum, the investment could be worth around £19,000 by the time the child turns 11, which is secondary school age.

This sum wouldn’t be make-or-break in deciding whether you could afford to pay for a private education, but it could cover almost a year’s worth of fees. Remember that the average termly fee for a day school is now £7,832, according to ISC data.

You would need to use up some of your own annual ISA allowance to do this rather than opening a junior ISA in your child’s name. This is because you can only contribute £9,000 per year to a junior ISA, and the money cannot be withdrawn until the child turns 18.

Investing a regular monthly amount on top of the initial lump sum could result in a significantly larger sum. If you started with the same initial £10,000 lump sum and contributed a further £100 every month, you could have around £37,500 by the time the child turns 11, assuming the same growth rate as before.

6. Look into trusts

If you want to invest but have already used up your ISA allowance, you could consider investing through a bare trust. Bare trusts are often used to pass assets to young people. The trustees look after them until the beneficiary is old enough.

“Bare trusts are easy to set up – most investment companies have a form you can fill in. The advantage of these trusts is that income and gains are usually treated as belonging to the child, so they’re taxed as the child’s,” said Coles. This means they are typically within tax-free allowances.

“The exception to this is where money is paid into the trust by a parent and the income is £100 or more, in which case it is taxed at the parent’s marginal rate. It’s therefore most suitable for investments which don’t produce an income, or for contributions from grandparents,” she added.

If you have questions about tax liabilities, it is worth speaking to a financial adviser.