There’s no doubt that the best education that money can buy will help a child be academically successful, but also provide a non-academic experience that may serve them well as an adult.  For many the cost of private schooling may seem restraining, however with a little planning it may not be as unachievable as initial concern. Grandparents may wish to help their children fund the cost of their grandchildren’s education in a tax efficient manner.


  • Parents of children are subject to high rates of tax on extracting money from their existing company. 
  • Parents have children for whom fees and other costs are being paid from their net income.
  • Grandparents hold shares in the company or if they do not currently hold shares, they are willing to invest in their child’s company.


Grandparents could consider settling their shares into a bare trust to hold the shares for the benefit of the Beneficiaries i.e. their grandchildren. This gives the grandchildren the benefits of holding the shares but without any control.
Income that is generated on the shares held in trust will be subject to income tax, but the dividend income arising on the shares is assessed on the grandchildren (not the grandparent) who would potentially have access to all or majority of their personal allowance and dividend allowance.


We envisage the following benefits:

  • Allows grandparents to assist their children in a tax efficient manner by playing a large role in funding their grandchildren’s education.
  • May be able to fully utilise the personal allowance of £12,570 and dividend allowance of £2,000, giving £14,570 of income that can be extracted without an income tax charge from the company, per child.  Where the parents or grandparents are currently extracting income at higher tax rates this can result in a huge annual saving.
  • Control of shares remains with the grandparent as trustees.
  • Where grandparents are required to be added as shareholders, the shareholding can encompass only limited rights so no dilution of control of business/trade for Parent.
  • No ongoing costs but savings continue into future years.