A family investment company (FIC) is an ordinary UK company set up to hold family wealth, structured so that parents keep control of the assets through one class of shares while future growth in value builds up in a different class of shares typically held by children or a trust for them. It is not a tax shelter and it does not remove tax on the money altogether, but it is one of the main alternatives to a trust for families who want to pass on future growth while retaining day-to-day control.
What is a family investment company?
A FIC is a private limited company, incorporated in the normal way at Companies House, whose purpose is to hold investments, property or other family assets rather than trade. Parents (or grandparents) typically subscribe the initial capital, often as a loan to the company rather than a straight gift, and take a class of shares that carries voting control and the right to income, such as dividends.
Children, or a trust for their benefit, hold a different class of shares. Those shares are usually structured to have little value at the point they are issued, sometimes almost none, but to carry the right to the growth in the company's assets over time. As the company's investments increase in value, that growth accrues to the children's shares while the parents retain control through their own class.
Where does a FIC fit compared with a trust?
Both a FIC and a trust let you separate control from future benefit, but they work differently and suit different situations, and both sit within the wider field of inheritance tax planning. A trust involves gifting assets into the trust, which can trigger an immediate inheritance tax entry charge where the value transferred exceeds the available nil-rate band, and trusts face their own ten-yearly charges thereafter. A FIC, by contrast, is typically funded by a loan from the parents to the company rather than an outright gift, which avoids an immediate lifetime tax charge on setting it up, though the loan itself remains part of the parents' estate until repaid or otherwise dealt with.
A FIC also has a simpler, more familiar governance structure than a trust for many business owners: it works like any other company, with directors, shareholders, and standard company law, rather than trustees exercising fiduciary duties under trust law. Some families prefer that familiarity, especially where the parents already run a business and are comfortable with a corporate structure.
What a FIC does not offer is a trust's flexibility around discretionary distributions to a wide class of beneficiaries, or the confidentiality that comes with assets simply not appearing on a public register in the beneficiaries' own names. Company accounts and a registered shareholder list at Companies House are, subject to some filing exemptions for smaller companies, a more visible structure than a trust.
What does a FIC cost to run?
A FIC is a company, so it carries company running costs: incorporation, annual accounts, a corporation tax return, and ongoing accountancy and legal fees to keep the share structure and any shareholder agreement in good order. These costs are ongoing for as long as the company exists, unlike a one-off gift.
The company also pays corporation tax on its profits in the normal way. The main rate is 25% for FY2026 (1 April 2026 to 31 March 2027), with a small profits rate of 19% for companies with profits of £50,000 or less, and marginal relief tapering between the two. Investment income and gains within the company are taxed at these corporate rates, not at personal income tax rates, which is one of the reasons FICs can suit families with significant investment income to reinvest, since the company rate can be lower than a higher or additional rate taxpayer's personal rate.
What happens when money comes out of the company?
This is where the honest limitations of a FIC start to matter. Corporation tax is only the first layer. When profits are extracted from the company, typically as dividends to the shareholders, that income is taxed again at the individual's dividend tax rates.
These are the dividend tax rates from 6 April 2026, an increase from the previous 8.75%/33.75%/39.35% bands. A FIC is not a way to avoid this second layer of tax; it is a way to control when and to whom income and growth are paid out, and to whose personal tax position that extraction is taxed against. A child on a lower income, extracting dividends from their own shares, may pay less tax on that extraction than a parent would on the same income, but the underlying corporation tax and dividend tax structure still applies.
What are the honest limitations?
A FIC is not a magic shelter from inheritance tax or income tax, and it should not be presented as one. Loans from parents to the company remain part of the parents' estate for inheritance tax purposes until they are repaid, gifted, or otherwise dealt with, so setting up a FIC does not, by itself, remove value from a parent's estate. It is the subsequent steps, such as writing off or gifting the loan, that need to be considered as part of a wider plan, and those steps have their own tax consequences.
HMRC also pays attention to structures used primarily to reduce tax rather than for a genuine commercial or family purpose, and FICs are not exempt from that scrutiny. A FIC needs to be set up and run properly, with a genuine commercial rationale, proper company governance, and shares that are actually structured and valued correctly, not simply as a label attached to an arrangement designed to avoid tax. Getting the share structure or valuation wrong at the outset can undermine the whole point of the exercise.
A FIC also does not suit every family. It works best where there is a meaningful amount of investment capital to justify the ongoing running costs, and where the parents are comfortable with a corporate structure and the transparency that comes with it.
Who should consider a family investment company?
A FIC tends to suit business owners or high-net-worth parents who already have investment capital, whether from a business sale, accumulated savings, or a property portfolio, and who want to start passing on future growth to children while keeping control of the underlying assets during their own lifetime. It is a longer-term, structural decision rather than a quick fix, and it works alongside, not instead of, wider tax planning, including use of the nil-rate band and gifting allowances covered in our guide to the seven-year gift rule.
Worked example
Example. Consider a business owner who has sold a trading company and has £2 million to invest, alongside two adult children she wants to benefit from the growth on that capital over time without handing over control now. Rather than gifting the money outright or setting up a trust, she incorporates a FIC, subscribes the £2 million to the company mostly as a loan, and takes voting, income-bearing shares for herself. Her two children each take a small class of growth shares with minimal value at the outset.
The company invests the capital. Over the following years, as the investments grow in value, that growth accrues to the children's shares rather than her own. She retains control as the majority voting shareholder and a director, and can decide, year to year, how much income the company distributes and to whom. She understands that the £2 million loan she made to the company remains part of her own estate for inheritance tax purposes unless and until she deals with it further, and that any dividends the company pays out will be taxed again at dividend rates in the hands of whoever receives them. The FIC gives her control and a mechanism for future growth to pass to her children; it does not, on its own, reduce the tax due on the money already in her estate.
What this means in practice
Working out whether you have enough investment capital to justify a FIC's ongoing running costs, and understanding broadly how the control and growth shares would be structured, are things you can start thinking through yourself.
Setting up the company correctly, valuing the shares properly, documenting a genuine commercial rationale, and integrating the FIC with your wider estate and inheritance tax position is not something to do without advice. The share structure, the loan versus gift decision, and the ongoing governance all need to be right from the outset, because unpicking a poorly structured FIC later is far harder than setting one up properly the first time.
Talk to us before you set one up
If you are considering a family investment company as an alternative to a trust, speak to one of our senior managers. The first conversation is about your family's circumstances, whether a FIC, a trust, or a combination of approaches fits best, and what the ongoing running costs and tax position would actually look like for you. Call 020 8554 2135 or email info@visionconsulting.co.uk, or get in touch via our contact page.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances.