Family Investment Companies: Protecting Wealth Across Generations
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:
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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.
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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.
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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.
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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.
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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
FICs are usually best suited to families with substantial assets as the costs of setup and ongoing administration can outweigh the benefits for smaller estates.
FICs pay corporation tax on investment income and gains (currently 25% for most companies, with a small profits rate of 19%). Dividends paid out to shareholders may also be subject to personal tax, depending on the recipient’s circumstances.
Both can help with estate planning, but trusts are more rigid in how assets are distributed, while FICs offer more flexibility and allow founders to retain greater control over investments and decision-making.
Yes. Shares in an FIC can be transferred to family members, reducing the founder’s estate for IHT purposes. If the donor survives seven years after making the gift, those shares usually fall outside their taxable estate.
They can be, but cross-border tax rules are complex. An FIC may interact differently with the tax systems of your country of residence. That’s why expats should always seek tailored advice from a specialist who understands both UK and international tax rules.
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
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