With the current tax environment in the UK being fluid and subject to change, Family Investment Companies (FICs) offer a flexible and tax-efficient way to preserve and grow wealth for future generations. Their ability to adapt to shifting tax policies while providing inheritance planning and investment benefits makes them an attractive option for families looking to secure their financial legacy.
What is a Family Investment Company (FIC)?
(In Simple Terms)
A Family Investment Company (FIC) is a private company set up by a family to hold and grow wealth, typically for future generations. Instead of keeping money in personal accounts or trusts, the family places assets (like cash, shares, property, or investments) into a company structure. The family members then own shares in the company, and it’s run like a business.
It’s commonly used by wealthy individuals or families who want to reduce inheritance tax (IHT), maintain control over assets, and manage wealth efficiently.
How Does a Family Investment Company Work?
1. You set up a limited company
The family creates a company with different classes of shares.
2. Family members become shareholders
Parents often keep control, while children or future heirs are given shares.
3. Money or assets are placed into the company
This can include cash, property, or investments.
4. The company invests and manages the assets
The company can grow wealth through investments, much like an individual would.
5. Profits are taxed at corporation tax rates
Instead of paying high personal tax rates, the company benefits from lower tax rates on investment income.
What Are the Benefits for UK Families?
- Tax Efficiency - Instead of paying personal income tax on investments, the company pays corporation tax (currently 25%), which can be lower than personal tax rates.
- Inheritance Tax (IHT) Planning – By gifting shares over time, parents can reduce the size of their taxable estate and minimize the 40% IHT that applies when passing wealth to heirs.
- Control Over Wealth – Unlike trusts, where assets are often handed over, the founders of the FIC (e.g., parents) can retain control while benefiting future generations.
- Protecting Family Assets – Assets held in the company may be safer from divorce settlements or financial risks affecting individual family members.
- Flexible Income Planning – Shareholders can receive dividends, but payments can be structured to minimize personal tax liabilities.
Who Might Use a Family Investment Company?
- Families with significant wealth who want to pass it on tax-efficiently.
- Business owners looking to reinvest wealth tax-efficiently.
- Parents wanting to protect assets for future generations while keeping control.
However, setting up an FIC requires careful tax and legal planning. It’s best to consult a specialist so if you’d like to know more, get in touch with us and we can set you up with a free initial conversation with excellent firms that can advise if they are the right thing for you.
Important information
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.
