Family investment companies.

A family investment company is a private company owned by members of one family that holds investments such as shares, funds, cash or property. Parents usually hold voting shares and control the company, while children hold shares that carry future growth. It is an ordinary limited company used as a long-term structure for managing and passing on family wealth.

Parents fund the company by lending it money, subscribing for shares, or both. The company invests and pays corporation tax on taxable profits. Parents keep control through voting shares, while children hold growth shares. Money reaches the family through loan repayments, which are not taxed as income, or dividends, which are taxed at the shareholder's dividend rates.

Neither is better in every case. A lifetime gift into most trusts above the £325,000 nil-rate band is charged at 20%, with ten-yearly charges of up to 6%. Gifts of FIC shares to individuals are normally potentially exempt, with no entry or ten-yearly charges, but a FIC has company running costs and taxes money twice on the way out. Some families use both.

A FIC has set-up costs and ongoing accounts, corporation tax returns and Companies House filings, and its accounts are generally on the public record. Most FICs pay corporation tax at 25% whatever their profit, and money taken out as dividends is taxed again. Business property relief is not available on the shares. Moving existing investments or property in can trigger capital gains tax, and share rights are fixed in a way a discretionary trust is not.

Most FICs are close investment-holding companies, so they pay corporation tax at the 25% main rate on taxable profits whatever their size. Dividends received from shareholdings are generally exempt if they fall within an exempt class. Interest, rental profits and gains are taxable. Shareholders then pay income tax on dividends they receive, at 10.75%, 35.75% or 39.35% for 2026/27.

No. A company pays corporation tax on its chargeable gains, not capital gains tax. For most FICs that means the 25% main rate, because they are close investment-holding companies. A company does not get the £3,000 annual exempt amount that individuals have. Tax is only due on the shareholders when money is paid out to them, for example as dividends.

The usual routes are repaying the loan you made to the company, which is not taxed as income, and dividends, taxed on each shareholder at 10.75%, 35.75% or 39.35% after the £500 allowance. If the company pays interest on your loan, the interest is your taxable savings income and the company normally deducts income tax first. A salary is deductible for the company only where it pays for genuine work at a commercial rate.

The company itself does not pay inheritance tax, and there are no ten-yearly charges as there are for most trusts. Shares you give to individuals are usually potentially exempt transfers that leave your estate after seven years. Shares you keep, and any loan the company owes you, stay in your estate. Business property relief does not apply, because the company holds investments.

You can, but transferring investments or property to a company you are connected with is a disposal at market value. Capital gains tax is charged on any gain as if you had sold, and a transfer of land or property can also carry stamp duty land tax. Where the assets carry large gains, funding the company with cash is often the simpler starting point. We work out the cost before anything moves.

Yes. Rental profits are taxed in the company, and a company mainly letting land to unconnected people may fall outside the close investment-holding company rules. In England and Northern Ireland a company buying a home for over £500,000 can pay stamp duty land tax at 17% unless a relief applies. The annual tax on enveloped dwellings can apply above £500,000, with relief for commercial letting to unconnected tenants claimed on a return.

Yes, but if a parent gives shares to an unmarried child under 18 and the income from that parent's gifts is more than £100 in a year, all of it is taxed as the parent's income. Many families use non-voting shares that do not pay dividends until the children are adults. A trust can hold the shares for control, but income paid to a parent's minor child is still taxed on the parent. The design depends on the children's ages and your aims.

Yes. The rule that taxes a minor child's income on the parent applies to gifts from a parent, so dividends on shares funded by grandparents are usually taxed on the grandchild. That changes if a parent is in substance providing the money, for example through an arrangement with the grandparents. For inheritance tax, gifts of shares by grandparents are usually potentially exempt transfers, subject to the seven year rule.

There are legal and accountancy costs to set it up, then annual accounts, a corporation tax return, a Companies House confirmation statement and shareholders' dividend reporting. These costs are ongoing for the life of the company. We give you a fixed quote for the work once we know the structure, so you can weigh the cost against the benefit.