Why families use Family Investment Companies (FICs)?

Key takeaways

• FICs (UK incorporated FICs) can support long‑term inheritance tax planning while allowing founders to retain control.
• FICs may offer a practical alternative to trusts where immediate inheritance tax charges could otherwise arise.
• Changes to inheritance tax rules are increasing client appetite for FIC structures.
• While the main rate of corporation tax recently rose for larger companies, FICs can still be effective when carefully structured and managed.

Inheritance tax planning and intergenerational wealth transfer

FICs can provide an effective vehicle through which family wealth is invested and grown, with the benefit that future growth (and potentially part of the initial capital) can be passed to the next generation for inheritance tax purposes. This can significantly reduce the inheritance tax exposure of the founding generation over time.

Unlike some other succession planning structures, FICs enable founders to retain a high degree of control over both investment decisions and distributions, while still facilitating the gradual transfer of value to younger family members.

Control and flexibility for founders

A key attraction of FICs is the optionality for founders to maintain control at both board and shareholder level. This makes FICs particularly appealing to families who want to safeguard assets, manage risk and control the pace at which wealth is transferred.

Because FICs are structured as companies with shares and directors, they are often intuitive for business owners and entrepreneurs who are already familiar with corporate governance and decision‑making frameworks.

An alternative to trusts in succession planning

FICs are increasingly being used where trusts are not suitable, particularly where the creation of a trust would trigger an immediate inheritance tax charge. This is especially relevant in light of changes taking effect from 6 April 2026.

From that date, transferring relieved property, such as agricultural or business property, into trust above an individual’s 100% relief allowance may give rise to an upfront inheritance tax charge at an effective rate of 10% on assets exceeding £2.5 million. For non‑relieved assets, the charge would broadly be 20% above the individual’s nil rate band.

By contrast, it may be possible to transfer assets of greater value into a FIC without triggering an immediate inheritance tax charge, making FICs an attractive alternative to trusts for many families.

Tax considerations and ongoing management

Although the recent increase in the main rate of corporation tax (for larger companies) has reduced some of the historic tax advantages associated with FICs, main rates remain lower than they have been in the majority of the past 50 years. With careful structuring and ongoing management, FICs can still offer meaningful tax efficiencies.

There is no special tax regime for FICs; a FIC is subject to the same corporation tax rules as any other company, and its shareholders are typically taxed under the normal tax rules when value is extracted. However, there are complex rules that may apply in certain circumstances, underlining the importance of taking specialist advice and returning to first principles when assessing the tax position.

Beware that profits are effectively taxed twice (corporation tax on the way in, income tax on extraction). The real corporation tax advantage is deferral rather than an outright rate saving. UK dividends received by a FIC are generally exempt from corporation tax.

Is a Family Investment Company right for you?

FICs can be well suited to families who want to retain control, protect family wealth and plan for future generations in a structured and tax‑efficient way. They are particularly attractive to business owners, entrepreneurs and high‑net‑worth individuals seeking a familiar corporate framework for long‑term succession planning.

As inheritance tax rules continue to evolve, many families are reassessing whether a FIC could play a role in their wider estate and succession planning strategy.