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With the start of the 2025/26 school year already upon us in Scotland and due to start in England in early September, many families are thinking carefully about how to fund future education for their children, especially with rising costs and the introduction of VAT at 20% on private school fees since January 2025.
Whether you’re a parent or a grandparent looking to help, it’s more important than ever to plan ahead and make the most of the options available and to explore the most efficient ways to save and invest.
ISAs
One of the most effective ways to start is by saving and investing tax-efficiently. Maximising ISA allowances and starting early can help money grow over time. The earlier you begin, the more time your savings have to benefit from compounding returns – especially useful if you know school fees are on the horizon in a few years for children, or indeed grandchildren.
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Example - new ISA investments for school fees
With a 5% return, investing £750 per month for 4 years would grow to approximately £39,760 by age 4 which is the earliest a child can start prep school in England. Based on monthly compounding at 5%
Trusts
An increasingly more popular way for Grandparents to help support the future of their grandchildren is to gift money via a trust. This can be a helpful way to support education costs while also potentially reducing the value of your estate for inheritance tax purposes. Trusts can be a complex area of financial planning and would command bespoke advice to ensure the most appropriate trust is recommended.
