Family Investment Companies: A Flexible Tool for Wealth Planning

9th March 2026 | James Crook | Family Investment Company, Inheritance Tax, Succession Planning

For families looking to preserve and grow their wealth across generations, a family investment company (or "FIC") has become one of the most popular and effective planning structures available in England and Wales.

You do not need to be ultra wealthy for an FIC to be useful. FICs are now widely used by families to protect and manage a broad range of assets, from investment portfolios and cash savings, to buy-to-let properties.

In this article, we explain what a family investment company is, why it might be worth considering as part of your long-term financial planning and how our firm can assist you to set up your FIC.

 

What Is a Family Investment Company “FIC”?

A family investment company is simply a private limited company, incorporated at Companies House, that is used by a family to hold and manage investments. It is not company with a special legal status. Rather, it is an ordinary company, but one that is set up and structured with a  family’s wealth objectives and continuity in mind.

Typically, the founders (usually the parents or grandparents, but not always) subscribe for shares in the company and then transfer cash or other assets into it. The company uses those assets to invest, for example, in shares or property. The key feature is the share structure of an FIC, which is carefully designed so that the founders retain control of the company while gradually passing the economic value of the investments to the next generation.

 

How Does it Work?

The flexibility of an FIC lies in its ability to issue different classes of shares, each carrying different rights. A common FIC arrangement might look like this:

• Voting shares are held by the founders (again, usually the parents or grandparents), giving them full control over the company’s decisions, including how profits are distributed and how investments are managed.
• Growth shares are issued to children or grandchildren. These shares carry the right to receive dividends and to benefit from any increase in the value of the company’s assets, but they carry no voting rights meaning the holders have no control over the company’s decision making.

This means the founders can retain a firm hand on the assets put into the FIC while ensuring that, over time, wealth passes down to the younger generations in a structured and controlled way.

 

5 Key Benefits of Using a Family Investment Company for Wealth Planning

Control Over Family Wealth

One of the most compelling advantages of an FIC is the degree of control it offers. Unlike an outright gift (where once you give money away, you have no say in how it is used) an FIC allows the founders to decide when and how much wealth is distributed to family members. Dividends can be declared selectively, at different rates, to different shareholders, and at different times. This is particularly useful where the founders are not yet confident that younger family members are ready to manage significant sums.

 

Inheritance Tax Planning

An FIC can be a highly effective tool for inheritance tax (IHT) planning. When the founders transfer assets into the company and the growth in value accrues to the next generation’s shares, that growth falls outside the founders’ estates for IHT purposes.

If the founders transfer cash or assets into the company by way of subscribing for shares at par value and the growth shares are issued to the children at the outset, then the future increase in the company’s value belongs to the children and not the founders. Over time, this can significantly reduce the founders’ taxable estates.

It is important to note that the initial transfer of value may be treated as a chargeable lifetime transfer for IHT purposes, and the founders will need to survive for seven years for the transfer to fall out of their estates entirely. Careful structuring and professional advice at the outset are essential.

 

Income Tax Efficiency

Investments held within a company such as an FIC are subject to current corporation tax rates on their returns, rather than income tax. The current rate of corporation tax (25% for profits over £250,000, with a small profits rate of 19%) can compare favourably with the higher and additional rates of income tax (40% and 45%) that individuals might otherwise pay on the same investment income.

Profits retained within the FIC can be reinvested without any further tax charge, allowing the investment pot to grow more efficiently over time. Dividends are only taxed in the hands of individual shareholders when they are actually paid out, and this gives the family more flexibility to manage the timing and amount of any personal tax liabilities.

 

Asset Protection

Because the assets sit within a company, and are not held by the founders personally, they are afforded a degree of protection from personal claims. The corporate structure can in some circumstances provide a useful layer of separation between family wealth and the personal affairs of individual family members, including in the event of divorce or bankruptcy.

 

Succession Planning

An FIC provides a natural framework for succession planning. Shares can be transferred, gifted, or issued to the next generation over time, and the articles of association, which govern the FIC can include provisions that restrict the transfer of shares to people outside of the family. This helps to ensure that wealth remains within the family across multiple generations.

 

Are There Any Drawbacks to a Family Investment Company?

As with any planning structure, an FIC is not without its complexities. There are set-up costs, ongoing filing obligations at Companies House and with HMRC, and the company’s accounts will be publicly available on the register (although this may be avoided, in some cases, where an unlimited liability company is used – but that has drawbacks of its own).

HMRC is well aware of the potential for FICs to be used as vehicles for tax avoidance. The settlements legislation, the Transfer of Assets Abroad rules, and the close company provisions can all apply in certain circumstances. It is crucial that any FIC structure is established on proper advice and for genuine commercial and family reasons, not solely to avoid tax.

An FIC is not a one-size-fits-all solution, and it is not appropriate in every case. The benefits depend on your personal circumstances, the size and nature of your assets, and your long-term objectives.

 

How We Can Help

At Sherrards, our Corporate and Private Wealth teams work together to advise families on the establishment and ongoing management of family investment companies.

Our Private Wealth team works closely with clients and their financial advisers to understand the family’s broader wealth planning objectives, including estate planning, succession, and inheritance tax considerations. The Private Wealth team is well placed to advise on the gifting of shares, the interaction with wills and existing trust arrangements, and the wider implications for the family’s overall estate plan.

Once the blueprint for the FIC has been designed, typically by the client’s tax adviser in conjunction with our Private Wealth team, our Corporate team steps in to build it. We are, in that sense, the builders rather than the architects. Our Corporate lawyers draft the bespoke articles of association, establish the appropriate share classes, prepare shareholders’ agreements, and handle the incorporation and all necessary filings. We ensure that the legal documentation accurately and robustly reflects the structure that has been designed, and that it is fit for purpose both now and as the family’s circumstances evolve.

 

If you would like to explore whether a Family Investment Company could work for you, please do not hesitate to get in touch with our team for an initial conversation.