Funding your kids through university

Funding the kids through university

Form a new company to handle the admin for your company. Make your university children shareholders in the new company, possibly also with yourself. Give the new company a contract at commercial rates to do your company’s admin for it, so that ‘new company’ makes circa the profit that you want to provide for your child’s education per annum.

In this way your income will be less (tax saved on say £9,000/pa @ 20% = £1,800) and your child’s income from new company will be tax free. The drawback is the accountant’s fees and general expenses on ‘new company’. These can be largely avoided, if you give your child shares in your own company (possibly a special class of shares) to achieve the same effect.

Similar benefits can be achieved in passing shares to children (18+) who have a much lower income than their parents.

Great care is needed in getting this statement right. Therefore, as with most of our tips, do not do this without engaging the service of a quality accountant – such as ourselves.

An even simpler way of creating a tax free income for your child, when they have no other income, is to pay them a salary (at a commercial rate) for doing a real job of work within your company.