Family Investment Companies: A modern solution for tax efficiency and passing on wealth
James Kipping · Posted on: October 30th 2025 · read
This insight was written by James Kipping with co-authors David Hume, Matthew Beckett and Paul Mansfield.
A Family Investment Company (FIC) is a private company structure used in the UK to manage and pass on family wealth. It’s especially popular among high-net-worth families looking for a flexible alternative to trusts. In this article, we explore the benefits of FICs, how they can be funded, and the portfolio options available.
Key benefits are:
- Tax Efficiency
- Control & Flexibility
- Administrative Simplicity
Tax Efficiency
Lower tax rates: FICs are subject to corporation tax (main rate currently 25%), which is often lower than personal income or capital gains tax rates.
Inheritance Tax (IHT) planning: Transferring assets into a FIC can reduce IHT exposure, especially if shares are gifted and the donor survives seven years.
Trust Comparison: Generally, a transfer to a limited company does not trigger a lifetime IHT charge at 20% over your available nil rate band (currently £325,000). In addition, a limited company would not be subject to IHT charges on each ten-year anniversary.
Dividend treatment: Dividends received by the FIC may be tax-free, and dividends paid to shareholders can be structured to optimise tax liabilities.
Remuneration planning: Income in the form of salary, benefits and pension contributions may form part of an overall tax efficient profit extraction policy for director/shareholders.
Control & Flexibility
Custom share classes: You can issue different types of shares to family members, allowing control over voting rights and income distribution.
Retain control: Founders (often parents) can retain decision-making power while gradually transferring wealth to the next generation.
Safeguard against family disputes: Shareholder agreements and tailored Articles of Association help manage succession and avoid conflicts.
Ring-fencing assets: Assets held within the FIC are legally separate from personal ownership, offering protection from personal liabilities.
Administrative Simplicity
Familiar structure: Many families find the corporate format easier to understand and manage than trust arrangements.
Low compliance costs: Annual filings and accounts are required, so whilst they may be more costly that other passive investment structures, they may be comparable or even lower than those associated with trusts.
Funding a FIC
This can be done in a few flexible and strategic ways, depending on your goals and the assets you want to contribute.
Here's a breakdown of the most common methods:
Cash Subscription for Shares
• You can inject cash into the company in exchange for shares.
• This is the simplest and cleanest method, often used to establish initial ownership structure.
Asset Transfer
• Property, investments, or other non-cash assets can be transferred into the FIC.
• Be mindful: this may trigger Stamp Duty Land Tax (England), Land Transaction Tax (Wales), Land and Buildings Transaction Tax (Scotland) or Capital Gains Tax depending on the asset type and value.
Loans to the Company
• Founders often fund the FIC via interest-free or interest-bearing loans.
• Loans offer flexibility—funds can be withdrawn later through repayment without triggering dividend tax.
Combination of Equity and Debt
A Simple Example
A couple with adult children has £5 million in investments. They created a FIC, transferring the assets in exchange for loan notes. Parents retained voting shares only whilst the children received non-voting shares, but with entitlement to dividends and capital.
Outcome:
- Parents maintained control of the investments.
- Future growth is passed to the children to reduce the parents’ exposure to IHT.
- The parents may draw down on the loan from the company free of income tax.
Financial Advice and Portfolio Services for FIC’s
Our team of independent financial advisors and wealth managers can offer a range of portfolio services for a FIC, including:
Bespoke Portfolio Service
A fully tailored investment solution designed to reflect the family’s unique financial goals, values, and legacy aspirations.
Benefits
- Personalised Strategy Aligns with long-term family objectives such as succession planning, philanthropy, or lifestyle needs.
- Flexible Structure Adapts to evolving family circumstances and market dynamics.
- Greater Control Enables direct input into asset selection and investment themes.
- Risk Tolerance Portfolio will be rebalanced to ensure investment is managed within agreed tolerance.
- Tax & Estate Planning Can be structured to support efficient wealth transfer and tax optimization.
Model Portfolio Service
A streamlined investment approach using professionally managed portfolios aligned to specific risk profiles.
Benefits
Operational Efficiency
Simplifies implementation and ongoing management.
Cost-Effective
Lower fees due to standardized investment processes.
Disciplined Allocation
Ensures consistent rebalancing and risk management.
Transparency
Clear reporting and performance tracking.
Structured Products
Both structured investments (e.g. capital-at-risk notes, auto-calls) and structured deposits (capital-protected products) are considered financial instruments and can be held as part of the FICs overall investment portfolio.
Pensions
"One significant advantage of a family investment company over personal investment is the ability for the company to make employer pension contributions for directors or employees of the company, typically the family members."
Pension contributions will normally be tax deductible for the company and will be a tax-free benefit for the individual.
Expert advice is required to ensure contributions do not cause an unexpected tax issue through tapering of the annual allowance and that the monies are held in the most suitable pension structure to meet each individual member of the FIC circumstances. This may be a Personal pension scheme (PPP), a Self-Invested personal pension scheme (SIPP) or a Small Self-Administrated Scheme (SSAS).
Tax Efficient Life Assurance
Relevant life insurance is a tax-efficient life cover solution arranged and paid for by an employer on the life of a single employee or director. For members of a Family Investment Company (FIC), which is usually a UK-resident private company with family shareholders and directors, relevant life insurance can be an appropriate way to provide individual life cover with significant tax advantages.
Download your copy of our Family Investment Companies guide below:
Family Investment Companies
MHA Can Help - Contact Us
Not sure which route is right for you? Let’s talk through your options.
For a truly integrated approach to planning that goes beyond optimising tax efficiency, our private client tax specialists work closely with MHA Wealth, our team of independent financial advisors. By aligning business strategy with personal financial goals, we help ensure that our clients protect their wealth and secure their long-term financial legacy.
If you believe a FIC would suit your family’s goals, please do contact your usual tax advisor or our private client tax team to discuss this matter further, or with any other tax-related queries.
View our latest insights
MHA Wealth Disclaimer
MHA Wealth is the trading name of MHA Wealth Ltd, a company registered in England (1916615) with registered office at The Pinnacle, 150 Midsummer Boulevard, Milton Keynes, MK9 1LZ.
MHA Wealth is authorised and regulated by the Financial Conduct Authority (FCA) with registered number 143715 and is a member of the London Stock Exchange.
This communication is for general information only, is a marketing communication, and is not intended to be individual investment advice, a recommendation, tax, or legal advice. The views expressed in this article are those of MHA Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk.
This information represents our understanding at the time of publication of current law and HM Revenue & Customs practice. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. You are therefore recommended to seek professional regulated advice before taking any action.
MHA Wealth is a member of the MHA group. Further information on the MHA group can be found at https://www.mha.co.uk/about-mha-group.
