Higher Fees for Higher Education

Students who start on or after 1 September 2012 will subject to a new Student Finance Scheme. Universities and colleges will be able to charge up to £9,000 per year. If you include accommodation and general living costs that amount could rise to over £15,000 each year.

Loans are available for students to pay for living expenses and tuition fees, the later begins to be paid back after students have left their course and earn over £21,000.

With students looking at potential debt levels of over £45,000 after a 3 year course, some parents may feel uncomfortable with their children building up such large debts.

Are there tax efficient ways to fund my child through their course?

There are a number of ways that one can invest on behalf of their children.

Junior ISAs (JISAs)

Following the end of new Child Trust Funds (CTF), children under 18 who do not have a CTF will be eligible for a JISA.

Up to £3,600 per tax year can be invested in a JISA; children can hold one Cash ISA and one Stocks and Shares ISA and each can only be held with one provider. Once the child turns 18, funds will be accessible and the JISA will automatically become an ISA.

Bare Trusts

A Bare Trust, otherwise known as a ‘Simple Trust’, can be a very tax efficient method to invest for children.

The beneficiary will have an immediate and absolute right to the income and capital of the Scotland).

If the grandparents are the donors, the grandchild will be subject to income tax on any income received by the trust. Any income up to the grandchildren’s personal allowance of £8,105 will be tax free. However if the parents are the donors, if the gross income received from the bare trust investment exceeds £100 in a tax year, the whole income is taxed in full as the parents income.

If the parent is a higher rate tax payer, it may be sensible to invest in low-yielding or capital growth orientated investments.

If you would like more information please call Ward Williams Financial Services on 01932 830664 for an informal discussion, or to book an appointment with one of our highly qualified financial planners.