Quarter of wealthy grandparents say they're paying for grandchildren's education to reduce inheritance tax

By HELEN CRANE, DEPUTY EDITOR, THIS IS MONEY Updated: 00:02, 13 August 2026 A quarter of wealthy grandparents say they are helping to fund their grandchild's education so that they can pay less inheritance tax.  Wealth planner Rathbones surveyed more than 1,000 wealthy parents and grandparents who were already helping to fund school or university education, or planned to do so.  Of the grandparents, a quarter said tax planning was a 'major factor' in their decision to help pay school or university costs.  More than two-thirds said inheritance tax considerations influenced their decision to some degree.  One in five grandparents who already provide support say they cover most or all university costs, including 7 per cent who fund virtually the entire expense of higher education.  Almost three in five say family support is combined with student borrowing, for example student loans. Generous: Wealthy grandparents are helping their grandchildren with the cost of university... and hope to cut the tax bill on their estate at the same time It comes as more than 300,000 students receive their A-Level results today, with many having to face the cost of attending university.  According to previous data from Rathbones, 26 per cent of parents who currently contribute, or plan to, expect to spend an eye-watering £50,000 per child.  Gifting money to family during your lifetime, rather than leaving it as an inheritance, is a popular way to reduce the tax that is due on your estate when you die.  Most estates don't pay inheritance tax at the moment, but more are set to be drawn into the net from April 2027 when unspent pension pots become liable for the tax, dragging more people above the tax-free threshold of £325,000. In Rathbones' survey, 67 per cent of respondents said the forthcoming changes increased their desire to help fund education costs during their lifetime rather than leave money as part of their estate. Tuition fees will be £9,790 per year in 2026-27 for most. Almost all students can receive a loan for these costs.  For living expenses, students can receive an annual maintenance loan of up to £10,830 if they live away from home, rising to £14,135 in London. However, this is means-tested based on their parents' income and some students only receive the minimum of £4,915. Inheritance tax is levied at 40 per cent on the part of an estate that’s above that threshold. For inheritance tax purposes, your estate includes your home, savings, investments, valuable personal items such as jewellery and, from 2027, unspent pension pots. Everyone gets a gifting allowance of £3,000 per year which is free of tax. Larger gifts can also be free of inheritance tax but only if you live for seven years after making them. If you die within that time, you will pay tax on a sliding scale depending on the time that has elapsed between the gift being made and your death. It starts at the full whack of 40 per cent if it's within the first three years, reducing to 8 per cent if it’s between year six and seven. Find out more using This is Money's guide to inheritance tax. Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. Terms and conditions apply on all offers.