Understanding Family Investment Companies: A Guide for UK Wealth Planning

Are rising taxes eating into your rental profits? Managing family wealth requires careful planning to protect assets and minimize taxes. At Talwar Accountant, we support clients in exploring tools like Family Investment Companies (FICs) to achieve these goals. This guide explains what FICs are, their structure, and their tax benefits for UK families and landlords in the 2025/26 tax year.

What Is a Family Investment Company?

A Family Investment Company (FIC) is a private limited company set up to hold and manage family investments, such as cash, shares, or rental properties. Unlike trusts, FICs offer flexible control and tax-efficient wealth transfer to future generations. They’re ideal for high-net-worth families or landlords seeking to safeguard assets while planning for succession, complementing strategies like tax-efficient expense management (see our expenses guide). You can incorporate by buying new properties via a company — or transfer existing ones, which may come with CGT and SDLT costs.

Structure of a Family Investment Company

• Share Classes: Founders often hold voting shares to retain control, while non-voting shares are gifted to family members (e.g., children) for income or growth.
• Directorship: Family members or professionals act as directors, managing investments and distributions.
• Funding: FICs are typically funded by a founder’s loan (repaid tax-free) or share subscriptions, keeping initial tax costs low.

A shareholders’ agreement ensures privacy and governs operations, unlike public Articles of Association. This structure helps avoid common planning errors (read our mistakes guide).

Tax Benefits of FICs

• Corporation Tax: FICs pay Corporation Tax at 25% (or 19% under £50k) on profits—lower than the 45% top income tax rate. Dividends from most companies are exempt.
• Inheritance Tax (IHT): Gifting non-voting shares can be a PET and fall out of the founder’s estate after 7 years—no 20% entry or 10-year charges like trusts.
• Capital Gains Tax (CGT): Gains are taxed at Corporation Tax rates, not the personal 20%/28% CGT. Share sales may still trigger CGT personally.

Example: How the Patels Used a Family Investment Company to Protect Their Property Wealth

The Patels own five rental properties generating £65,000 in annual profit. Both parents are higher-rate taxpayers, and they want to pass wealth to their two children, aged 14 and 17, without triggering a large inheritance tax bill.

They set up a Family Investment Company (FIC) with this structure:

• Voting shares: Held by the parents, so they retain full control
• Non-voting shares: Gifted to the children
• Funding: The company is funded with a director’s loan, allowing profits to be recycled tax-free

Benefits:

• Tax on profits is capped at 19% instead of 40%+ income tax
• Mortgage interest remains fully deductible
• No IHT on gifted shares if the parents survive 7 years — potentially saving over £200,000
• Profit retained in the company is used to buy a sixth property without personal tax exposure
• Eventually, dividends can be paid to the children once they are adults and in lower tax brackets

Is an FIC Right for Your Family?

A Family Investment Company isn’t just for the ultra-wealthy — but it’s not for everyone either. The right structure depends on your long-term goals, current tax exposure, and how you plan to pass on wealth.

Here are some signs an FIC might be a good fit:

• ✅ You’re a higher-rate taxpayer with significant rental or investment income
• ✅ You want to retain control while gradually passing wealth to your children
• ✅ You plan to reinvest profits, rather than extracting all income personally
• ✅ You’re concerned about inheritance tax (IHT) and want to plan early
• ✅ You have multiple assets or properties and want to simplify management

On the other hand, an FIC may not be suitable if:

• You have only one or two small properties
• You rely heavily on rental income for day-to-day living
• Your estate is unlikely to exceed the IHT threshold
• You prefer simpler structures with minimal admin and legal costs

FICs are most effective when used proactively, not reactively. If you’re unsure whether a company structure aligns with your family’s goals, we can run side-by-side projections to show the tax and succession impact of each option.

Considerations for Landlords and Families

For landlords, FICs can hold rental properties, streamlining tax reporting and aligning with Making Tax Digital (MTD) requirements starting April 2026 (see our MTD guide). However, residential properties may face Annual Tax on Enveloped Dwellings (ATED) charges unless reliefs apply. Families must weigh setup costs and ongoing compliance, ensuring the FIC suits their goals (read our rental income guide).

Plan Your Wealth with Confidence

FICs offer a flexible, tax-efficient way to manage and transfer wealth. For tailored advice on setting up an FIC or optimizing your taxes, contact Talwar Accountant to discuss your 2025/26 planning needs.