We run something called a Personal Budget Review with our clients when they incorporate. The aim is to assess your family outgoings and see what can be moved over to be paid by your company, minimising your exposure to tax. The swing in taxes paid on expenses is whopping; as an example, a mobile phone with a retail price of £1,000 will typically set you back £1,500 via dividends because of dividend tax, yet the same phone will cost your company £800 because the purchase actually reduces your company’s existing tax exposure.
Invariably the Personal Budget Review identifies that the biggest expense for our clients after their mortgage is school fees. Private schooling, like tax planning, looks morally dubious to its critics, but it’s usually a no brainer for those with the means to pay for it (and in reality each child sent to private school saves taxpayers a place worth £6,200 a year at secondary school). Apart from being one of the biggest investments you’ll ever make, private school fees are among the most meaningful in terms of your legacy. Tax planning can make them significantly more affordable.
For context, as the world’s sixth wealthiest country the UK is poor at educating its children. We rank 14th for reading and science and 18th for maths in the international school league tables and our children are among the most miserable (just 53% feel satisfied with their lives, compared to 67% across the 37 member countries of the Organisation for Economic Co-operation and Development).
But we remain the envy of the world for our private schools, many of which have been going for 300 or 400 years and make parents a compelling offer: in return for fees averaging £15k a year for day pupils and £33k for boarders we will pull your child out of this funk and instil spirit and resilience, with some eccentric old school values that are getting harder to find and might just make the difference for them in the melee of adult life. As well as decent grades, of course.
If you were cynical about it, the biggest asset that private school imbues is self-confidence and a natural ease in high net worth circles. Why else would so many wealthy Asian families, including those of Chinese Communist Party apparatchiks, send their kids to boarding schools here? Or welcome so many franchises of British private schools in their countries? Demand is high. Chinese investors are increasingly buying up debt-ridden private schools in the UK, and China has a rapidly growing market for UK education groups.
Supply is limited because these schools are part of a precious ecosystem of long-cultivated institutions that successive governments have not managed to ruin, and they are thin on the ground around the world. Yet they are here on our doorstep, which is why our clients tend to find it interesting when we find ways of making them more affordable. There is no one answer for all of our clients. Any solution will be bespoke to your circumstances. Regardless, our approach can make a significant long term impact on your family.