According to the media, parents with children at some of the UK’s leading private schools have paid their fees up front in a bid to reduce costs. The reason parents are now doing this is largely down to the Government’s decision to charge VAT on private education fees as from January 2025.
As a result of the decision, private school fees have skyrocketed. Indeed, an article by the BBC revealed that private school fees soared by 22.6% in the 12 months leading up to May 2025, with the inclusion of VAT being a major contributor.
With this in mind, it’s not surprising that parents have been looking for ways to reduce the impact of the increasing costs on their finances. Another way you could ease the impact of private school fees on your wealth is to put money aside, which can then be used to cover the cost when the time comes.
While putting money aside could provide a significant pot of money and go a long way towards meeting the cost of private education, you may need to take care if you intend to use a savings account. Before we look at why this is, let’s look at the cost of private education in more detail.
School fees could cost around £19,000 a year or more
According to goodschoolsguide.co.uk, the average fee for sending a child to a UK private day school is around £19,000 a year. If you send them to a boarding school, the average is around £50,000 a year.
As you can see, the costs for sending your child to private school could be significant. For example, if you send your child to a private day school from the age of 5 to when they leave at the age of 18, it could cost close to £250,000.
If you send them to a boarding school, it could be £650,000 or more. With this in mind, creating a pot of money to help with these costs is likely to be a very shrewd financial strategy.
Inflation could reduce the value of the money you put aside
That said, if you’re thinking of putting money into cash savings you may need to take care, as inflation could significantly reduce its value in real terms. Inflation is the rising cost of goods and services over time, which means £100 is likely to buy you less in the future than it will today.
To demonstrate the potential effects of inflation, you might want to consider the Bank of England’s Inflation Calculator, which reveals that you needed £154.80 in June 2025 to have the same spending power as £100 in June 2010. As such, your money needed to grow by nearly 55% during the 15 years just to keep pace with inflation and if it didn't your money’s spending power dropped dramatically.
If your cash savings are not growing by the rate of inflation, or more, it could have serious implications for the cash you put aside for your child’s education.
Investing your money might expose it to greater growth potential
One way you might be able to ‘inflation-proof’ your settlement is to consider investing it, as historically, the stock market has tended to outperform cash savings. This is highlighted by the following graph, which shows the performance of a medium risk 60:40 multi-asset investment portfolio between 1 January 2005 and 31 January 2025.
Data sourced from Morningstar by AFH Wealth Management. The 60:40 portfolio allocates 60% to MSCI All Country World Index (ACWI) and 40% to Bloomberg Global Aggregate.
As you can see, the investment portfolio provided significant returns over the long-term, despite downturns along the way. Always remember that past performance is no guarantee of future performance and you may receive back less than your original investment.
You might want to consider a Stocks and Shares ISA
As Individual Savings Accounts (ISA’s) are not exposed to Income Tax, when the time comes for you to fund your child’s education you can access your investments without any exposure to tax.
Better still, any growth your investments enjoy are free from Capital Gains Tax, which could help to boost your money’s long-term returns. In 2025/26, you can place up to £20,000 into an ISA, however if you don’t use it, you lose it when the next tax year begins on 6 April.
As you can see, this allowance means you may be able to build a significant and tax-efficient pot of money much more quickly than you might think. Please remember that while you can put money into a cash ISA, a Stocks and Shares ISA, or both, you must not exceed the allowance.
Get in touch
If you have children, grandchildren, or great grandchildren that you would like to send to private school, talking to a financial adviser could help you to meet the cost more easily. As one of the UK’s largest independent financial advice companies, we can help you to meet your financial goals more quickly and with peace of mind.
Please call us on 0333 010 0008 if you would like to discuss how you might be able to create a fund for your child’s, or grandchild’s, education. We would be happy to arrange a no obligation initial meeting with one of our independent financial advisers.
18 August 2025