Family Investment Company (FIC)
A company structure used by families for long-term wealth management and IHT planning. Profits are taxed at 25% corporation tax rather than up to 45% personal rates.
By Omair SaoLast reviewed — rates for the 2026/27 tax year. See how we check our figures.
How It Works
A company is set up with voting shares (founder) and non-voting growth shares (children/family). The founder injects capital and retains control. Growth accrues to family members' shares. Corporation tax at 25% applies to profits. Over time, value transfers to the next generation, reducing the founder's IHT estate.
Tax Treatment
Company pays 25% corporation tax on investment income and gains. Dividends to shareholders subject to dividend tax. Founder retains voting control while passing economic value to next generation through different share classes.
Tax Advantages
- Corporation tax at 25% vs up to 45% personal income tax
- IHT planning — growth accrues to next generation's shares
- Founder retains full voting control
- Dividend timing can suit family members' tax positions
- No IHT periodic charges (unlike discretionary trusts)
Who Is This Suitable For?
High-net-worth families (typically £500,000+ investable assets) wanting succession planning and IHT reduction while retaining control. Requires specialist legal and tax advice.
Worked Example: £1,000,000 lent to a new FIC in year one
- 1A founder sets up a company with voting shares for herself and non-voting growth shares for her two adult children, and lends it £1,000,000 rather than subscribing for shares, so the loan can later be repaid to her free of tax.
- 2In year one the portfolio produces £40,000 of interest and rental income.
- 3As a close investment-holding company it cannot use the 19% small profits rate or marginal relief, so corporation tax is 25%: £10,000, leaving £30,000 to reinvest.
- 4Dividends the company receives from its share portfolio are usually exempt from corporation tax, so an equity-heavy FIC pays little internal tax on that part of its return.
- 5Growth in the company's value accrues to the children's shares from day one, outside the founder's estate, while the outstanding loan stays inside it.
Result: The FIC defers personal tax and shifts future growth to the next generation, but only earns its keep with substantial assets and professional support.
Illustrative figures using the 2026/27 rules on this page, last checked on 25 September 2026.
Advantages and Drawbacks
Advantages
- Retained profits are taxed at 25% rather than at personal rates, so more stays invested.
- The founder keeps voting control while economic value passes to family members.
- There are no ten-year or exit charges of the kind that apply to discretionary trusts.
Drawbacks
- Extracting money as dividends triggers a second layer of personal tax, so the 25% rate is only a saving while profits stay inside.
- Accounts are filed at Companies House, making the family's wealth publicly visible unless a more complex unlimited company structure is used.
- Setup typically costs £3,000 to £10,000 plus annual accounting and tax compliance.
- HMRC has taken a close interest in FICs, and the settlements legislation can tax the founder on income where minor children hold shares.
Notes for Limited Company Owners
If you already own a trading company, a FIC is an associated company: the corporation tax limits are shared, so both may lose the small profits rate sooner. Never let the FIC hold the trading company's shares without advice, because the group and Business Relief consequences are significant.
Common Mistakes
- Gifting growth shares to minor children and forgetting that dividends on them are taxed on the parent.
- Letting the FIC count as an associated company of your trading business, which divides the £50,000 and £250,000 corporation tax thresholds between them.
- Funding the company with a share subscription instead of a loan, which makes it harder to withdraw capital tax-free later.
Who Should Avoid It
Families with less than around £500,000 to invest, anyone who needs the capital back within a few years, and founders unwilling to pay for ongoing specialist advice.
Official Sources
The rules on this page come from the following official pages and were checked on 25 September 2026. Read how we check our figures.
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Frequently Asked Questions
How much does setup cost?
Typically £3,000-£10,000 for legal and tax advice plus ongoing accounts and returns. Only justified for significant assets (£500,000+).
Can HMRC challenge a FIC?
HMRC has increased scrutiny. Key risks include settlements legislation, pre-owned assets rules, and general anti-avoidance. Specialist advice is essential.
FIC vs discretionary trust?
FICs have no 10-year IHT charge, benefit from lower corp tax, and offer share structure flexibility. Trusts offer greater asset protection. Many advisers recommend considering both.