Specialist Music School - fee contributions affected by new rules on rental income tax

[maggiethecat]

Although new rules start to take effect from next tax year and on sliding basis I am concerned that parental contributions at my daughter's school is calculated based on income as per tax returns. If property income is used to calculate fees without consideration of mortgage expenses we will not be able to afford fees.
Although we see the intentions of the govt in implementing these rules surely it cannot be right to apply the same principles in assessing family income to determine fees.
Is anyone with children at specialist music/dance/drama school affected by these rules?

I'm not well off as it happens. But I wouldn't dream of thinking that My kids should be entitled to bursaries or the like to help with school fees - because they are not financially disadvantaged. My DD1 doesn't learn her principal study instrument at school, lessons aren't available. In fact though, lessons in school for the instruments they do offer aren't any cheaper than outside school ones. There's no discount and, in this LEA anyway, in school lessons are just private lessons on school premises. I do, as it happens, contribute monthly to a charity which supports disadvantaged kids access arts education - I already mentioned that up-thread. And I'm involved in other community music charities both where I live and somewhere else (that one is run by a friend of mine and somehow I agreed to help out years ago and I've never stopped). I also pay shit loads of tax including full NI contributions. If it's any of your business (it isn't). I am painfully aware of the barriers that disadvantaged kids face in accessing arts education - these are big enough without the additional barrier of well off/comfortable middle class people trying to dip into the funding pot which should be there for those who need it not those who just want it.

This is how you should prepare for the changes - accept that you will have to pay more. Do so with good grace. Realise that to complain is incredibly crass in the circumstances. And count your blessings.

I don't think the OP is trying to fleece anyone. The government provide this education & she applied based on their rules at the time.

There would be uproar if a new rule was brought in saying that all parents with a high income had to make a contribution towards their previously free state school. It's the goalposts being changed part way through a child's education that is the objection. Families who felt they were able to afford the contributions may now have to remove their children.

maggie

I have the current notes for the forms I filled in for this year, haven't got next years yet
I don't understand what you mean though and our accountant helped with ours last year, so I'm probably no use.
Can you explain in simpler terms and I'll help if I can.
I'm not sure if we'll be affected or not.
We have another property but it's not mortgaged.
I'm sure I just had to declare the income.
I take it you are referring to MADS

For others
www.gov.uk/music-dance-scheme

Sorry Maggie, have read the thread now.
I know what you mean now.

Do you know you can contact the bursar and pay a different way if your earnings are going to be less than they were the previous year. I'm not sure whether your situation will come under this, but maybe worth a try.

I do wish they'd send the forms as I like to know I've started them in good time as I struggle with this stuff. The figures are fine as accountant helps with this, for me it's knowing where to put the details. I hate forms

You will find crassness in your posts upthread as you have heralded your good deeds while ridiculing others' choices, making various assumptions about my circumstances and declaring me a cheat.

You pay shit loads of taxes but are not well off - by whose standards and by which measure? (rhetorical - I don't wish to know your business). I own properties and so must be well off, especially since you know my circumstances.

Upon your advice, I shall now submit to being assessed differently from everyone else who is on the MDS, and pay full fees.

Balletgirl, makes no sense trying to reason. I clearly am very privileged, probably inherited lots of money, never worked hard for my money, generally do not pay taxes or offer any charity and am a downright cheat!

There is a reason many parents call it MADS and not MDS.
It isn't a bursary and not the same as any of the bursaries offered by schools.
People pass judgement and admit they know nothing about it at all.

You can be quite rich and not be able to pay the reduced fees because your income is tied to debt.

It is an assisted scheme based on income alone.
They are not interested in your outgoings at all and ask for no information.

There are allowances of over 2k for additional dependant children.

Utred,

I love my dd very much and it breaks my heart to wave her off and not know if I'll see her at the weekend or have to wait until the week after.
The pain I feel is indescribable.I still haven't settled after nearly a year.

You should be ashamed of your comment about not wanting your dd to board because you "like her".

What do you expect us to do, dissuade our children from an education they deserve.
I can't be so selfish as to stop her going for her dream.
I know I speak for many other parents in our situation.

"Sell one of your properties. Realise the unearned increase in capital you will almost certainly have waiting for you. Pay the fees. Let someone who needs the funding have the funding." There is not a fixed pot of money so one person getting MDS funding doesn't stop somebody else at the school getting MDS funding. Different for a school bursary but that is a different subject here.

Maggiethecat
Anyone with a child receiving an MDS or DaDa will be affected by these rules in my view. I am not an accountant, I should add! As you will be aware the government has decided that buy to let income will be treated as "gross" income for tax purposes. A "rebate" of 20% will then be applied to mortgage interest. The effect of this does not, as widely reported, only affect high rate taxpayers but also those who are "pushed into" the higher rate by reason of the assessment based on gross income. To take an exaggerated example.

Paul and Molly have no income other than their 10 buy to let properties which they rent out for £100,000/year. Their mortgage costs are £80,000/year.
Under the present rules, they pay no tax (they each make £10,000 profit, under the no tax threshold).
Under the new rules, they will be assessed for tax on £100,000. I can't work out exactly how much tax that is, but let's say £30,000. They then get a rebate of 20% of £80,000 - or £16,000. As you can see the change in rules pushes them from no tax to £14,000 tax a year.
Now, as a further consequence, if Paul and Molly's daughter is at an MDS school, they will currently pay £600/year. Under the new rules they will pay £14,000 because they are now assessed on a gross income of £100,000, albeit that they do not receive £100,000. The new rules, combined with the effect on MDS cost Paul and Molly £27,400/year.
This is how the new rules will operate in my view. For what it is worth, my view is that if Paul and Molly don't want to pay £14,000 they should sell some or all of the buy to lets!
There is historic precedence for the "unfairness" that might be perceived by this change. No changes to the MDS scheme were made when some families lost child benefit, even though their "incomes" might have dropped considerably as a result of those changes.
I think most people would be quite surprised to learn that MDS is assessed on income only. I suspect that there a few very wealthy individuals with kids on MDS schemes who have millions in the bank but only take a yearly "income" of £30,000 or so, therefore paying very little MDS fees.
What can you do? Sell, move to a limited company structure or pay higher fees!

These changes will also unwittingly push parents over the £90,000 cliff edge for Dada help.

Clara, thanks for your calculations - many are still confused by the math.

I have spoken with someone at the learning directorate and she advised that fee contributions will continue to be rental income profit based unless there were parliamentary debate to determine otherwise. Hopefully good sense will prevail and that people will pay based on what they earn.

Has anybody any experience of capital gains in relation to the MDS forms?