Private education - any tax advantages?

[pindy]

Hi

I am sure somewhere I have read that Grandparents can get tax benefits if paying or contributing to their grandchildres private education - anyone know anything more about this?

Have a friend who is considering putting her child into private education but the funding would be a struggle so any bright ideas etc that I could pass on would be great.

Thanks

It's not really that much of a tax advantage. If you die and leave over [£300k?] your heirs have to pay 40% inheritance tax. If you give your money away before you die you don't - if you live 7 years after you give it away there is no tax on death and in addition even if you die next year you can make "small gifts" for example to grandchildren. That is the only tax advantage. But the gradnparent might want to spend it all on themselves before they die anyway or they might want to give it to someone else. It only works if they have a lot to leave and would like to start handing it out now. It does not save them anything on their income tax now (except they have fewer savings so less interest so less tax on the interest I suppose).

Yes, Xenia's right. 30 yrs ago there were tax advantages available on paying school fees.

Now it's just IHT avoidance.

At one point our children's grandparents covenanted money to the youngest children and then then we could reclaim the tax back from the tax office each year but that was abolished a long time ago before I think we even started paying school fees.

The tax benefit is only as regards Inheritance tax payable after death. You can give away £3000 per year without it attracting tax after the donor's death and you can also give away surplus income (e.g. if your income was £20k pa and you only spent £15k you could give away £5k). Beyond that you can only give small gifts of money each year. There used to be schemes involving trusts that grandparents could use - I don't know whether these have all now been stopped.

I think you can still give your money away either as a direct gift as mentioned below or you can put a large sum of it into a trust - any of us can - which pays out income for children. You are right that the rules on these were tightened up - I think children haev to get the money at 18, not delayed to 25, yet another stupid Government idea not thought through or consulted over. 25 is wise. 18 is the last age any wise parent or grand parent would give children money but it's all the same thing - giving it away to avoid tax when you die, nothing any more helpful than that.

Of course what we should get is £5k a year cash from the Government for relieving the state of the obligation to educate our children and a pat on the back.

Thanks everyone will pass this on