Private School fees

[chinnyman]

I currently pay my sons school fees via my current account.

I also own my own business.

If the LTD Company was to pay the fees as part of my remuneration package then It would be added to my p11d and I would pay tax on it.

As I'm a higher rate tax payer, I would pay 45% tax on the bill?
Isn't that still better than me paying for it personally.

I've lost my personal allowance anyway due to wages and dividends.

Any help much appreciated.

[theboss]

You’d pay 45% tax and 2% NI, and the business would pay 13.8% employers NI

[chinnyman]

Thank you forgot to add.

We have a healthy bank balance in the business so I don't need to take anymore dividends so there is money sitting there.

( and I've added to pension etc)

[theboss]

There's no way to use company money to settle school fees without incurring the same tax burden you would by taking the money as salary or divs.

I don't believe it would feature on your P11D as a benefit either - it would just be deemed additional directors withdrawals like any other, and you'd either need to issue a dividend to cover or treat the payments as wages and payroll as such.

[chinnyman]

Thank you

I just got my head in a muddle this morning.
Doesn't appear to make much of a difference as either way I'll pay 45%

[Dg504]

Isn’t this where the old “let me sponsor your summer event” dealings come from?

[Drl22]

chinnyman said:

Thank you

I just got my head in a muddle this morning.
Doesn't appear to make much of a difference as either way I'll pay 45%

Ask your accountant about a grandparents trust, if they don’t know what it is, get a better one. I pay zero tax on my children’s school fees because of it and I also have no personal allowance.

[quinny100]

Dg504 said:

Isn’t this where the old “let me sponsor your summer event” dealings come from?

Somewhere I worked the owners kid was at private school and the business sponsored the equestrian team. We paid for horse rugs once a year and got 3 nondescript invoices from the school each year. Coincidentally, the value of these invoices was always exactly the same amount as the termly school fees shown on the website.....

[Sheepshanks]

theboss said:

There's no way to use company money to settle school fees without incurring the same tax burden you would by taking the money as salary or divs.

I don't know the precise details of how this works but it can be done if it's a "family" business, with, say, grandparents and parents involved. IIRC there has to be a trust set up.

I think you could even do it for friends and then they do it for you. Basically the payment can't be directly made by a parent for their own child.

[MickTravis665321]

How old is he? Perhaps you could "employ" him as IT Support on £12,570 a year and use that towards the school fees.

[Badda]

quinny100 said:

Somewhere I worked the owners kid was at private school and the business sponsored the equestrian team. We paid for horse rugs once a year and got 3 nondescript invoices from the school each year. Coincidentally, the value of these invoices was always exactly the same amount as the termly school fees shown on the website.....

Good luck getting a school to agree to this. What’s in it for them?

[M1AGM]

Drl22 said:

Ask your accountant about a grandparents trust, if they don’t know what it is, get a better one. I pay zero tax on my children’s school fees because of it and I also have no personal allowance.

Works well if there are grandparents alive and willing. Neither in my case.

[Mr Overheads]

Badda said:

quinny100 said:

Somewhere I worked the owners kid was at private school and the business sponsored the equestrian team. We paid for horse rugs once a year and got 3 nondescript invoices from the school each year. Coincidentally, the value of these invoices was always exactly the same amount as the termly school fees shown on the website.....

Good luck getting a school to agree to this. What’s in it for them?

Might work (I'm not a tax advisor) if you overpay for sponsorship by about half of what you would save in tax by paying this way., i.e. you save some personal tax, company saves some tax and school gets higher donation than the fees lost for giving away a scholarship to the child.

[RicksAlfas]

Many private schools are registered charities. Can it be done as a donation?

I would speak to the Bursar at the school as I am sure it's a commonly asked question.

[wattsm666]

It is not a donation, it is for a service (Education) and a bursar will be reluctant to accept a donation for school fees, that will cause all sorts of issues.

[R11ysf]

OP look in to Family Investment Corporations. You can pay the fees out of that which can be very beneficial depending on your circumstances. Speak to your accountant to see if it is suitable for you.

[z4RRSchris]

you can often get a discount for paying in a lump a few years in a go.. otherwise look at the investment trust set ups.

re the sponsorship, one parent paid for the sports hall at my prep school, another lad paid £2m for some building at my senior school, happens all the time but i think its just parents being nice.

[psi310398]

z4RRSchris said:

you can often get a discount for paying in a lump a few years in a go.. otherwise look at the investment trust set ups.

re the sponsorship, one parent paid for the sports hall at my prep school, another lad paid £2m for some building at my senior school, happens all the time but i think its just parents being nice.

I was surprised to find out when I offered to pay my son’s school fees in one lump sum, they didn’t even offer a token discount to recognise the time value preference of cash today. I ended up paying somewhere around £200,000 in one hit for tuition fees, and still got fairly fruity additional termly bills for the extras.

I worked out that the set up and running costs of establishing a trust were not far removed from the foregone interest, and as the school itself has been around since the 1570s it doesn’t represent much of a credit risk.

[z4RRSchris]

my old man got 25% off for paying in a lump for 4 kids.

[Louis Balfour]

Badda said:

quinny100 said:

Somewhere I worked the owners kid was at private school and the business sponsored the equestrian team. We paid for horse rugs once a year and got 3 nondescript invoices from the school each year. Coincidentally, the value of these invoices was always exactly the same amount as the termly school fees shown on the website.....

Good luck getting a school to agree to this. What’s in it for them?

An aside: I was told once, though I have been unable to verify it, that some of the prestigious public schools and universities are quite large landowners, because parents have paid land in lieu of fees.