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Pinpoint school fees planning

They could use the 5% tax-deferred allowance of course - but looking at the example above this will run out by the end of year 8 and the withdrawals will come back to haunt them (tax-wise) when the bond is finally encashed.

Perhaps they could just bite the bullet and fund the fees net of tax on the chargeable gains? This could be worthwhile, especially if one of them is a non-taxpayer, but it would depend on their tax position and the other tax effective strategies that they could use.

Funding university costs

The strategy of using an international investment bond and washing out the chargeable gains using the student’s available allowances can also work perfectly well for funding the costs of university.

In addition, it can also be tax effective for the parents as use can be made of bond assignments to shift the tax point to the student.

In conclusion

The expected cost of school fees can be frightening, but with effective financial planning it can be mitigated. The use of trusts and the tax profile of international bonds can be very useful in this regard.

You can find out more about paying school fees in an upcoming webinar from Canada Life on its website. 

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