Family Investment Companies: The New Strategy for Wealth Protection?

Family Investment Companies: The New Strategy for Wealth Protection?

Fears over Labour’s looming inheritance tax raid have sparked the ‘Great Wealth Transfer’ in the UK, as parents look to pass on assets to their children and grandchildren in a tax-efficient manner — sooner rather than later.

Why Families Are Turning to FICs

As part of this transfer, many high-net-worth individuals are considering Family Investment Companies (FICs) — a structure that allows families to pool assets into a company rather than using traditional trusts.

FICs are gaining popularity as more people feel comfortable with the idea of a limited company. They offer a more transparent structure than trusts, which often seem complicated or inaccessible.

Avoiding Inheritance Tax — While Keeping Control

By gifting company shares to children, families can reduce the value of the estate for inheritance tax (IHT) purposes — without giving up control of the assets.

This has become more urgent following Labour’s pledge to include unused pension pots in the IHT net from April 2027, while freezing current IHT thresholds. The nil-rate band remains at £325,000 (or £650,000 for couples), potentially rising to £1m if a family home is passed to direct descendants. Any estate value above this is taxed at 40%.

The FIC Advantage

FICs offer several tax and planning benefits:

• No upfront 20% IHT charge, as with trusts
  
  
• No cap on how much can be transferred
  
  
• Corporation tax (25%) on income, instead of personal income tax (up to 45%)
  
  
• Potential to remove value from the estate if structured carefully (e.g. alphabet shares) and parents survive 7 years after the transfer

These features make them particularly appealing to families with substantial liquid investments or complex succession plans.

Learn more about Wealth Structuring for UK Private Clients.

A Long-Term Strategy — Not a Silver Bullet

FICs are not suitable for every family. While they offer flexibility, tax efficiency, and control, shares remain part of the recipient’s estate — so this is a deferral of IHT, not a complete removal.

Still, they’re proving to be a smart tool for families looking to future-proof generational wealth — especially amid shifting tax policies.

Want support with inheritance tax planning? Visit our Inheritance Tax Planning page.

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