What is a Family Investment Company?
The plain-English answer, how the structure works, how it is taxed and whether it is likely to suit your family.
The short answer
A Family Investment Company (FIC) is a private limited company set up to hold and invest a family's wealth. Parents usually keep control through voting shares while children hold shares that receive future growth, so that growth sits outside the parents' estate for inheritance tax. Profits are taxed within the company at corporation tax rates rather than personal rates.
How does a Family Investment Company work?
The founders, usually parents or grandparents, set up a new company and put money into it, either by buying shares, lending money, or both. The company then invests that money in shares, funds, cash or property, much as the family would personally.
The difference is in who owns what. Different classes of shares are given different rights, so control, income and future growth can each be allocated deliberately between family members.
Who owns and controls a FIC?
- Founders typically hold voting shares and act as directors, so they decide investment policy and when dividends are paid.
- Children or grandchildren hold non-voting growth shares that benefit from increases in value.
- Shares for minors are often held through a trust. Dividends of more than £100 a year paid to a parent's own minor child on shares the parent provided are taxed as the parent's income, so profits are usually retained until children reach 18.
- A shareholders' agreement sets rules on selling shares, divorce and what happens on death.
How is a Family Investment Company taxed?
Most FICs are close investment-holding companies, so they pay corporation tax at the 25% main rate on income and gains, compared with personal rates of up to 45%. Most dividends it receives from other companies are exempt, which lets a share portfolio compound more efficiently. Tax is paid again by shareholders when profits are taken out as dividends, so FICs work best when money is left to grow.
How does a FIC help with inheritance tax?
Inheritance tax is charged at 40% on estates above the available allowances. Because the next generation owns the growth shares, future growth builds up in their hands rather than in the founders' estate. Subscribing cash for shares at full value is not a gift, so there is no lifetime charge. Growth shares need careful design, often with a hurdle, so they are worth little when issued. For the detail, read our inheritance tax planning guide.
Key facts at a glance
| Legal form | Private limited company, or an unlimited company to avoid filing accounts (at the cost of unlimited shareholder liability) |
|---|---|
| Tax on profits | Corporation tax, usually 25% (close investment-holding company) |
| Dividends received from UK companies | Usually exempt |
| Lifetime IHT charge on subscribing cash for shares at full value | None |
| Typical setup time | 4–8 weeks |
| Typical starting capital | Around £1m or more of surplus wealth |
FIC or family trust?
A trust passes control to trustees and can face 20% entry charges and ten-yearly charges. A FIC keeps control with the founders and avoids those charges, but its accounts are public. Compare the two side by side.
Is a Family Investment Company right for me?
It is most often worth exploring if you have around £1m or more you do not need to spend, want to pass wealth on over the long term, and are not ready to give up control. Below that level, simpler gifting and allowances are often cheaper.
Frequently asked questions
A Family Investment Company (FIC) is a private limited company set up to hold and invest a family's wealth. Parents usually keep control through voting shares while children hold shares that receive future growth, so that growth sits outside the parents' estate for inheritance tax. Profits are taxed within the company at corporation tax rates rather than personal rates.
Yes. A FIC is an ordinary UK company registered at Companies House. HMRC ran a dedicated FIC unit from 2019 and closed it in 2021, saying it had found no evidence of a link between FICs and non-compliance. They remain a mainstream planning tool, though anti-avoidance rules still apply.
Most FICs are close investment-holding companies, so they pay the 25% main rate of corporation tax on taxable profits; the 19% small profits rate does not apply to them. Most dividends the company receives from other companies are exempt. Shareholders pay income tax only when dividends are paid out to them.
Families with roughly £1m or more of capital they do not need to spend, a long investment horizon, and a wish to pass wealth on while keeping control of how it is invested.
A straightforward FIC is usually incorporated and funded within four to eight weeks. Bespoke share classes, family agreements or transfers of property can take longer.
Setup and annual accounting costs, public filing of accounts at Companies House, a second layer of tax when profits are paid out as dividends, possible capital gains tax or stamp duty if existing assets are moved in, and rules that tax a parent on dividends paid to their minor children.
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