For many parents, providing their children with a quality education is important; and for many reasons, this might mean opting for independent or private school. In the UK, this does come with a hefty price tag… and this year, the UK government introduced VAT to private school fees.
According to a survey conducted by Saltus and reported on by The Times in 2024, 71% of survey respondents said that rising school fees would have an impact on their choices around private schooling in the future. It found that 26% of the high-net worth parents who were asked said they “would have to remove their children from independent school if VAT was imposed”.
If you’re a UK parent and homeowner, and you’re set on putting your kids through the private system, there are some smart ways you can manage these rising costs —especially if you're open to using your home equity to your advantage.
Below, we explore how to manage private school fees without stretching your finances too thin.
1. Take a secured loan (or HELOC) out against your home
If you own your property and have built up equity paying off the mortgage, a second charge mortgage, often referred to as a secured homeowner loan, or a HELOC, could be a financially savvy way of paying for school fees. A homeowner loan allows you to borrow money against your home’s value, at lower interest rates than an unsecured loan would.
Why consider it?
- Lower interest rates: since the loan is secured against your property, lenders tend to offer more competitive rates compared to unsecured loans or credit cards.
- Only pay interest on what you use: with a HELOC, you're only charged interest on the amount you’ve borrowed. Instead of borrowing years worth of school fees with a standard loan and then just paying the school in termly instalments, you can draw down when you need to and only pay interest on the outstanding balance.
- Flexible repayment terms: secured loans often have longer repayment terms, which can help spread the cost, making the monthly payments more manageable.
Key considerations: do your research and make sure you're comfortable with the proposed repayment schedule. Remember, your home will be at risk if you cannot keep up with repayments.
Read more about Selina’s HELOC
2. Plan for the long term: prepay or pay in installments
Many private schools offer discounts for prepaying tuition fees in full or upfront for multiple years. Though it’s too late to avoid the 2025 VAT increases completely, planning ahead can result in significant savings.
Why consider it?
- Upfront discounts: some schools may offer reduced rates if you’re able to pay in advance or commit to several years.
Key considerations: weigh up the benefits of upfront savings versus the potential flexibility of a more staggered payment structure.
3. Use an offset mortgage
If you’re already a homeowner and you have an offset mortgage, you can leverage this financial tool to help fund school fees. With an offset mortgage, any savings you have are used to reduce the interest you pay on your mortgage. Instead of earning interest on your savings, the money goes towards reducing your mortgage interest giving you more disposable income, which could be directed towards school fees.
Why consider it?
- Maximising savings: by offsetting your mortgage, you can save on interest payments, freeing up more of your income for school fees.
Key considerations: this option only works if you already have a decent amount of savings to offset. You should also be comfortable not earning interest on those funds.
4. Tax-efficient investments and savings accounts
If you’re thinking ahead and have a few years to go before your child starts school, you may consider opening a tax-efficient savings account, like an Individual Savings Account (or ISA). Investment ISAs, in particular, allow you to invest in stocks and shares over time, and so can offer the potential for higher returns than a traditional savings account would.
Why consider it?
- Tax-free growth: any interest or capital gains earned on money in an ISA are tax-free, helping your savings grow faster.
- Long-term growth potential: stocks and shares ISAs may offer better returns compared to traditional savings accounts, though they do come with higher risk.
Key considerations: investment ISAs are popular amongst parents who can afford to take a longer term view, in order to weather any market fluctuations. For advice regarding investments, please speak to a qualified financial adviser.
5. Rent out a room or property
If you have extra space at home, renting out a room through schemes like the government’s Rent a Room Scheme can generate additional income. Under this scheme, you can earn up to £7,500 per year tax-free. If you own more than one property, you may consider renting out a second home or even running short-term holiday lets.
Why consider it?
- Low effort: once everything’s set up, this income stream can be relatively passive, especially with short-term rentals.
- Tax-free income: you can use the income from the rental to cover part of your school fees.
Key considerations: you’ll need to be comfortable sharing your space, and consider the cost and time involved in maintaining rental properties. For tax advice, please speak to a qualified tax specialist.
6. Scholarships and bursaries
Finally, don’t forget to explore scholarships and bursaries. Many private schools offer financial support and assistance based on academic ability or financial need. Even if you don’t qualify for full support, partial scholarships may be available and can help reduce your overall financial burden.
Why consider it?
- Significant savings: some bursaries cover up to 100% of the fees, while others may offer partial support.
- Merit-based opportunities: scholarships are often available for academic, sporting, or artistic talents. These are usually prestigious and may provide an extra incentive for your child to excel.
Key considerations: these awards are competitive, so ensure you meet all deadlines and requirements when applying.
Final thoughts
Managing the cost of private school fees as a homeowner doesn’t have to be as overwhelming as it can seem. By leveraging your property, exploring creative financial tools, and tapping into available resources, you can find a strategy that fits your family’s financial situation.
Always seek advice from a financial expert before making any major decisions, particularly when considering loans secured against your home. With careful planning, you can provide the education you want for your child without taking on unnecessary financial strain.
To learn more about how Selina can help improve your personal finances, visit our site or speak to one of our advisors today.
