Minimising the costs of further education

The cost of sending your children to university, including paying for student accommodation and providing a living allowance, can easily be in excess of £10,000 per child per year. It is not possible to avoid these costs, but if you own a trading company and receive dividends from your shares, it may be possible to reduce the impact of meeting these costs on you and your company.

With careful tax planning, a Trust can be used to pay accommodation costs and provide an income to your children in a very tax efficient manner. By transferring shares into Trust and declaring dividends on Trust shares rather than your shares, the dividends will be taxed at your children’s personal rates of tax rather than your higher or additional rates. This tax saving allows smaller dividends to be declared, resulting in savings to your company.

When this saving to your company is multiplied by the number of children you have and the number of years over which they attend university, the benefit of a Trust soon becomes apparent.

The tax implications of creating the Trust and of transferring the shares must be considered, however this will generally be neutral if your company is a trading company.

If you would like any further information on the use of Trusts for meeting the costs of further education, please do not hesitate to contact our IHT, Trusts and Estates Team:

Alison Beattie Elizabeth Shaw Lisa Watson

Tax Senior Manager Tax Manager Tax Assistant Manager

alison.beattie@aab.co.uk elizabeth.shaw@aab.co.uk lisa.watson@aab.co.uk