Family Investment Companies: Protecting Wealth Across Generations

Insight | by Mark Routen

Managing significant family wealth requires more than just good investments. It needs long-term planning, careful structuring, and clear strategies for passing assets to the next generation. For families with substantial UK-based assets, particularly property, a Family Investment Company (FIC) can be a powerful tool to achieve these aims. This article explains what an FIC is, the benefits it offers, and what to watch out for if you’re considering one for your family.

What is a Family Investment Company?

A Family Investment Company is a private company set up to hold and manage family assets, such as property, shares, or investment portfolios, under one structure. The company is owned by family members, who can hold different classes of shares to determine how wealth and decision-making power are divided.

Unlike a trust, an FIC keeps assets within a corporate framework. This gives families a way to retain more control over their wealth, benefit from corporate tax treatment, and plan more effectively for succession and intergenerational transfers.

Key Benefits of a Family Investment Company

1. Wealth Management and Diversification

An FIC provides a central vehicle for managing family assets in an organised way. By pooling investments such as property, equities, and bonds, the family can build a diversified portfolio. This approach reduces exposure to any single market and enhances long-term financial stability, making the family wealth more resilient to economic change.

2. Tax Planning Opportunities

Profits within an FIC are taxed at corporation tax rates (currently 25%). While this is slightly higher than the top rate of capital gains tax, it may still be more favourable than higher personal income tax or dividend tax rates faced by many families. Importantly, the ability to retain profits within the company means more funds can be reinvested for future growth.

For inheritance tax (IHT) purposes, shares in the company can be gifted to the next generation. These are treated as potentially exempt transfers (PETs). If the donor survives seven years after the gift, the shares will usually fall outside their estate for IHT purposes. This makes the FIC a flexible tool for managing wealth transfers while allowing parents to retain control through voting shares.

3. Succession Planning and Control

An FIC allows families to separate control from economic benefit by issuing different classes of shares. Parents, for example, may hold voting shares to retain influence over decisions, while children hold non-voting shares that entitle them to dividends. This structure ensures a smooth and gradual transfer of wealth, while parents retain authority over how and when distributions are made.

4. Family Governance

An FIC creates a clear governance framework for family wealth. Directors, often drawn from within the family, manage decisions about investments, distributions, and company strategy. In some cases, families also set up a “family council” alongside the board. This can be a valuable way to involve younger generations in discussions, helping them to learn about wealth management and instilling financial responsibility over time.

5. Asset Protection

Assets held inside the FIC are legally separate from the personal estates of family members. This limited liability structure helps protect family wealth from personal risks such as divorce, bankruptcy, or legal claims. For many families, this offers an extra layer of reassurance that wealth built over decades will remain secure for the future.

6. Flexibility and Customisation

Every family has different needs, and an FIC can be structured to reflect them. Share classes, dividend policies, and the company’s constitution can all be customised. For example, if family members live in different countries, dividends can be tailored to reflect the tax regimes they are subject to. This flexibility makes the FIC a versatile tool for families with complex circumstances.

7. Education and Values

An FIC is not just a tax or legal structure; it can also play an important role in shaping the family’s future. By giving the next generation a structured way to engage with family wealth, it helps them learn about investing, stewardship, and financial responsibility. Many families also use their FIC to pass on values and a shared vision for how wealth should be used to support future generations.

Important Considerations

While FICs offer many advantages, they are not suitable for every family. Key points to keep in mind include:

Residential property rules. Placing a main home or holiday property into a company can trigger punitive taxes such as the Annual Tax on Enveloped Dwellings (ATED) and benefit-in-kind charges if the property is used personally. This usually makes FICs unsuitable for family homes.
Complexity and cost. Establishing and running a company involves ongoing legal, tax, and administrative responsibilities. Families must file annual accounts, comply with Companies House requirements, and ensure proper governance is in place.
Not always more tax-efficient. While corporate taxation can be beneficial, extracting money from the company in the form of dividends or salaries still creates a personal tax liability. Whether an FIC delivers overall tax savings depends heavily on the family’s circumstances.
Inheritance tax. Share transfers are treated as potentially exempt transfers (PETs), not automatically exempt. This means inheritance tax could still apply if the donor dies within seven years of making the transfer.
Transparency. Although more private than trusts in some respects, FICs are still companies. This means annual accounts and some share transactions must be filed at Companies House. Families should be aware that this reduces the level of confidentiality compared to other wealth structures.

Should You Consider a Family Investment Company?

For the right families, an FIC can be a highly effective way to:

Manage and grow family wealth in a structured manner.
Reduce exposure to inheritance tax through share transfers.
Retain control while gradually passing assets to the next generation.
Protect family assets against personal financial risks.

They are generally best suited to families with substantial assets, particularly where intergenerational planning is a priority. For smaller estates, the costs and administrative complexity may outweigh the benefits.

Making the Complex Simple for Expats Worldwide

For internationally mobile families and British expats, FICs add another layer of complexity because of cross-border tax rules. What works well in the UK may be treated differently abroad, depending on local legislation. This is why it is vital to take advice from a cross-border tax specialist who can balance both UK and overseas considerations.

At Forth Capital, we work with high-net-worth families and globally mobile executives to help them protect and structure their wealth. If you are considering a Family Investment Company as part of your strategy, our advisors can guide you through the benefits, highlight potential risks, and design a structure that supports your long-term goals.

Contact us today to arrange an initial consultation.

Mark Routen
Chartered Tax Advisor

As Forth Capital's Head of Tax, I offer tailored tax planning advice to high net worth international private clients. I help them understand their options, optimise their cross-border arrangements, and create a robust plan for their future. To schedule an initial consultation, contact me today.

Frequently Asked Questions

Family Investment Companies are usually most suitable for families with substantial assets. The costs of setup, legal structuring, and ongoing administration can outweigh the benefits for smaller estates, so they tend to work best for high-value property portfolios or investment holdings.

Generally, no. Putting a main residence or holiday home into an FIC is usually impractical and very expensive. It can trigger punitive taxes such as the Annual Tax on Enveloped Dwellings (ATED) and benefit-in-kind charges if the property is used personally. FICs work best for investment properties and financial assets, not for homes the family lives in.

Not entirely. While an FIC may feel more private than a trust, it is still a registered company. This means annual accounts and certain share transactions must be filed with Companies House, and some of this information is publicly accessible. Families should be aware that an FIC cannot guarantee full confidentiality.

An FIC pays corporation tax at the main rate of 25% on its investment income and capital gains. Unlike trading companies, most FICs are treated as “close investment holding companies,” which means the lower small profits rate of 19% does not apply. When profits are paid out as dividends, shareholders may also face personal tax depending on their individual circumstances.

Both can help with estate planning, but they work differently. Trusts are bound by strict rules on how assets are distributed. An FIC, on the other hand, offers more flexibility and allows parents or founders to keep control over decision-making through voting shares, while still passing economic benefits to the next generation.

Yes. Shares in an FIC can be gifted to family members as Potentially Exempt Transfers (PETs). If the person making the gift survives for seven years after the transfer, those shares will normally fall outside their estate for IHT purposes. This can make an FIC a powerful tool for reducing the taxable value of an estate over time.

They can be, but cross-border tax rules make this a complex area. An FIC is always subject to UK tax rules on UK assets, but it may also interact with the tax system in the country where you live. This means professional advice is essential to avoid unexpected double taxation or compliance issues.

This communication is for information purposes only and does not constitute financial, legal, or tax advice.

All content is based on current UK legislation and is subject to change. Planning arrangements should be reviewed regularly in line with legislative updates and family circumstances.

Family Investment Companies (FICs) involve complex legal, tax, and governance considerations and may not be suitable for all families. The suitability of any investment or structure should be assessed on an individual basis with professional advice.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise, and you may not get back the amount originally invested.

Last updated 20 October 2025