Paying for school fees. From income to capital.
Read time: 6 mins
If you went through private school, your school fees almost certainly came out of your parents’ regular income. If you planned the same journey for your own children, it’s very likely that your income alone won’t be enough.
When school fees still tracked income
Ask many parents what they thought about the cost of private school and their answer was typically; “private school was expensive then, but we managed.” That perspective on private school fees was fair for longer than people think. Between 1984 and 1991, boarding school fees rose 37% in real terms and private day school fees 45%. The incomes of the wealthiest families rose almost as fast, 38% to 50% at the top of the distribution. Fees were climbing, but so was the capacity to pay them. For your parents, this was a big expense. Nevertheless, it was still, fundamentally, an income decision.
What it takes to fund one child’s education?
For one child, aged two today, taken through to the end of university, in today’s money:
State school, living at home
State school, UK university, renting
State school, US university
Private day, living at home
Private day, UK university, renting
Private boarding, living at home
Private boarding, UK university, renting
Private day, US university
Private boarding, US university
Total cost of the full journey, one child aged 2 today, in today’s money
What each route actually costs. Full journey for one child aged two today, expressed in today’s money, from nursery to the end of university. Note that the state route is not free: it still carries the costs that sit above fees, plus a university bill. Source: Y TREE education cost model, August 2026 assumptions.
For a family with three children, the bill for private school fees doesn’t spread evenly. It gradually increases each year with each child until it reaches a peak. A representative household with three children at private day school pays £3.67m over 21 years, peaking at £283,000 in the year when all three are in senior school.
Income or capital? The arithmetic is different
If you’re paying from a salary, £283,000 is close to punishing even for top earners. A single earner on £500,000 keeps £281,814 after tax. In the peak year, fees for three children would take it all. Add a second earner on £200,000, and the household keeps roughly 30% of combined pay. Probably not enough to live on, let alone save.
If you’re paying from capital, the relevant question isn’t affordability, its yield. Take a £10m portfolio on a typical advisory stack. After fees and underperformance it produces a net return of 2.2%. Two boarding places at £146,200 would consume 66% of everything that portfolio earns in a year.
Now strip the cost stack back to custody only, change nothing else, and the same fees take 22%. Same family, same school, same fees. The only thing that moved is what you’re paying to hold the capital.
For most families the cost may be invisible. They never run the numbers. They discover the impact when the education journeys end, the last fees are paid and the portfolio has barely grown. By then the cost is not the fees. It is twenty plus years of compounding that never happened.
Is it worth it?
A recent UK cohort study found the raw exam advantage for private pupils disappears once you control for background, and turns negative in maths, science and English. What does hold up is specialist and SEND (Special Educational Needs and Disabilities) provision. Here independent schools clearly outperform. Additionally, private school pupils apply to Oxbridge at double the rate of comprehensive pupils with the same grades. So it isn’t just about getting the grades. It’s a different approach and level of ambition which starts at home. It’s also worth noting that eight schools account for as many Oxbridge places as almost 3,000 others combined. Most private school fees are not buying that outcome.
The decision that’s needed
Here is the part that gets skipped. If the fees are coming from capital, every pound spent on school is a pound not compounding somewhere else. For many families, that somewhere else is a future deposit on their children’s first home. Spend the capital now on fees, and you’re choosing education over the head start you might otherwise be building for the next generation’s own capital. Preserve and grow it instead, and you may be trading some of what private school buys for a different kind of advantage, handed over a decade later. Neither answer is obviously right. But it is a choice between two uses of the same capital, not a question of whether the fees are “affordable.”
Four questions worth answering before the school decision, not after:
- What does the whole education pipeline cost, in the peak year, not the average one?
- Should it be paid from income or capital, and is that capital actually earning more than inflation, after costs?
- What does it displace: pension contributions, a property move, or capital you’d otherwise be building for your children directly?
- What specifically is this school buying that another one, or the state sector, genuinely can’t?
The school choice gets all the attention. The cost of the capital funding it, and what else that capital could have done usually matters more. That’s the number nobody checks.
Sources
Ryan, C. and Sibieta, L., Private schooling in the UK and Australia, Institute for Fiscal Studies Briefing Note, 2010. The 1984-91 and 1992-2008 fee-versus-income comparisons. Link
Sibieta, L., Tax, private school fees and state school spending, IFS Report R263, July 2023. Real fee growth of 20% since 2010-11 and 55% since 2003-04; average fee £15,200 against £8,000 of state spending per pupil. Link
Green, F., Private schools and inequality, Oxford Open Economics / IFS Deaton Review. The threefold real-terms rise since the 1980s; three-quarters of private pupils drawn from the top three income deciles. Link
HM Revenue & Customs, Percentile points from 1 to 99 for total income before and after tax (Table 3.1a), updated 29 April 2026. 99th percentile income of £96,400 in 1999-2000 rising to £207,000 in 2023-24. Link
Crawford, C. and Vignoles, A., Via the Institute for Fiscal Studies, October 2014. Raw graduate premium of 17.2%, falling to 7% adjusted and 6% after occupation. Link
Green, F., Henseke, G. and Vignoles, A., The private school earnings premium, British Educational Research Journal, 2017. 35% for men at 42 after background and ability controls, 4.5% and insignificant after industry controls. Link
Henderson, M. et al., British Journal of Educational Studies, November 2024. No private-school effect on GCSE attainment once background is controlled; core subjects favour state schools. Link
Sutton Trust, Access to Advantage, December 2018. Oxbridge application and acceptance rates by school type. Link
House of Commons Library, Private schools and VAT (CBP-10125), 26 June 2026. DfE January 2026 census: independent rolls, the age profile of exits, boarding numbers, and OBR pass-through assumptions. Link
Independent Schools Council, 3 June 2026. 30,000 fewer pupils since January 2025 and a net loss of more than 60 mainstream schools. Link
HM Treasury and HMRC, Inheritance Tax on pensions: technical note, 29 May 2026. Unused pension funds within the estate from 6 April 2027. Link
Crowe UK, Fees in advance schemes, 15 May 2024. The tax-point mechanism, the unrestricted-use requirement and the anti-forestalling date. Link
Saltus Wealth Index, February 2026. Pension reduction, additional borrowing and grandparental support among households with £250,000+ investable assets. Link
MTM Consulting, 4 June 2026. England independent enrolment 582,477 to 560,256; sixth-form market share down 0.77 percentage points; boarding schools down 5.4% against 3.0% at non-boarding schools. Link
Christie & Co, Business Outlook 2026: independent schools, 15 January 2026. 38 closures in calendar 2025 and 7,490 places lost; consolidation into corporate and private-equity ownership. Link
Y TREE, Education Cost Assumptions 2026-27 (August 2026 cycle, data as at 30 July 2026) and the Y TREE education cost model. All cost, capital and tax figures in this article.
This article is general commentary on the financial planning implications of independent education. It is not personal financial advice and no action should be taken on the basis of it alone; the appropriate course depends entirely on individual circumstances. All projections are illustrative, depend on the assumptions stated, and are not a reliable indicator of future outcomes. Where a family has actual known school costs, those costs, not these averages, are what we model.
