If you’ve built substantial wealth and you’re thinking about inheritance tax, family succession, and keeping control while planning for the next generation, you’ve probably come across the term “Family Investment Company” or “FIC”.
A Family Investment Company can be a powerful tool for wealth management and inheritance tax planning when used in the right circumstances. But it’s not suitable for everyone, and it comes with cost, complexity and ongoing admin that needs careful planning.
For many business owners and successful professionals in Poole, Bournemouth and across Dorset, the real value is this: you could start passing future investment growth to the next generation while retaining control and flexibility.
This guide explains what a Family Investment Company is, how it works, who it suits, and what you need to know before going any further.
Key Takeaways
- A Family Investment Company (FIC) is a private company used to hold and manage family investments for the long term
- Often explored for inheritance tax planning because future growth can be structured to sit outside your estate
- Typically suits families with £2 million+ in assets where the benefits could outweigh the setup and running costs
- Different share types allow you to separate control from financial benefit – parents keep voting control, children benefit from growth
- Professional advice is essential – a FIC touches tax, company law, and investment planning. Mistakes can be expensive
What Is a Family Investment Company (FIC) and Is It Right for You?
A Family Investment Company (FIC) is a UK private company set up to hold family wealth, usually investments, with the aim of long-term growth and structured family succession.
As an Independent Financial Adviser (IFA) in Dorset, I help families sense-check whether a FIC is genuinely the right fit, or whether a simpler route could achieve the same outcome with less cost and complexity.
How a Family Investment Company works
A FIC is a company with directors, shareholders and company accounts. Instead of holding investments personally, you hold them inside the company. A FIC can typically hold investment portfolios, cash, and some property holdings.
The key value is in the structure around control, access, and future wealth transfer.
Different share classes can be created with different rights. Parents might hold voting shares (keeping control over investment decisions and distributions), while children hold growth shares (benefiting from future investment returns). This flexibility is one of the main reasons families choose a FIC over simply gifting assets.
Who a FIC is usually for (and who it isn’t)
A Family Investment Company is usually considered when:
- You have substantial investable assets, often £2 million+
- You want to plan for inheritance tax exposure in a joined-up way
- You are thinking about family wealth across generations, not just your own retirement
- You are comfortable with ongoing admin, reporting and professional support
A FIC is less likely to be appropriate when:
- The amounts involved are modest (because costs can outweigh benefits)
- Most of your planning could be solved through simpler routes like ISAs, pensions, or gifting strategies
- You want something “set and forget” with minimal maintenance
A FIC is often a planning tool for families who have outgrown the basics, not a replacement for the basics themselves.
How Can a Family Investment Company Help with Inheritance Tax Planning?
A Family Investment Company is often explored because, when structured appropriately, it may allow future investment growth to sit outside your estate for inheritance tax purposes.
This is not a loophole, and it is not automatic. It depends on how the company is funded, what is gifted, when it is gifted, and your wider estate planning position.
Moving future growth outside your estate
The key inheritance tax benefit: future growth on investments held inside the company could potentially sit outside your estate.
You fund the FIC (often through a director’s loan or by gifting shares to family members), investments inside the FIC grow over time, that growth accrues to shares held by the next generation, and over time, this could reduce the value of your taxable estate.
Because this area is technical, it must be planned alongside a solicitor and tax adviser.
A director’s loan can offer flexibility
A common approach is to fund the FIC through a director’s loan. The loan could potentially be repaid back to you over time, creating a flexible way to access original capital for supplementing lifestyle income or managing cashflow in retirement.
The way money goes in and comes out matters and needs to be designed deliberately from day one.
Tax efficiency through company structure
A FIC pays corporation tax on profits, which could be lower than higher-rate personal income tax in some scenarios. If you’re reinvesting profits for long-term growth rather than taking income out immediately, the company structure could allow wealth to compound more efficiently.
When profits are extracted through dividends, that could create planning opportunities where dividends are paid to family members in lower tax bands, or who can use allowances sensibly.
However, this needs to be appropriate, properly documented, and aligned with the underlying share structure and wider family plan.
Why professional advice is essential for Family Investment Companies
Getting inheritance tax planning wrong can be expensive. A FIC must be structured correctly from the start, funded in the right way, documented properly, and reviewed regularly as tax rules change.
That’s why families working with Independent Financial Advisers in Dorset, alongside solicitors and tax advisers, tend to get better outcomes than those who try to “DIY” complex structures.
What Are the Downsides of a Family Investment Company?
A Family Investment Company can work brilliantly in the right circumstances, but it’s not a “quick win” structure. The disadvantages are usually about the reality of running a company properly and making sure the planning genuinely stacks up over time.
Setup and running costs can be significant
A FIC comes with professional costs at the outset and on an ongoing basis. Even a relatively straightforward structure often needs input from a solicitor, tax adviser, Independent Financial Adviser, and accountant.
Typical setup costs: £3,000 to £10,000 + depending on complexity.
Ongoing annual costs: £2,000 to £5,000 + for accounts, filings, and reviews.
For families with smaller sums, those costs can erode the benefits quickly.
Ongoing admin and compliance is not optional
A FIC needs to be maintained like any other company: annual accounts and Companies House filings, corporation tax returns, record keeping (director’s loan, dividends, share registers, board decisions), and regular professional reviews.
If you want something that runs quietly in the background with minimal involvement, a FIC can feel like hard work.
Double taxation can reduce the overall benefit
A common issue with FICs is that tax can be paid at two levels:
- The company pays corporation tax on profits
- Shareholders may then pay personal tax when money is extracted through dividends
This doesn’t make a FIC “bad”, but it means the strategy has to be designed around how profits will be used. A FIC often suits people who are happy to reinvest profits for long-term growth, rather than extracting everything as personal income each year.
It can become less tax-efficient if bolted on, rather than planned properly
A FIC should sit alongside other planning, not replace it.
If someone sets up a FIC but ignores simpler, proven tax-efficient routes like pensions and ISAs, the overall plan can end up more complex than it needs to be, without delivering better outcomes.
A FIC tends to work best when it is part of a joined-up strategy, built around retirement planning, investment strategy, inheritance tax exposure, business exit planning, and estate planning intentions.
Family complexity can turn into real-world friction
A FIC is a family structure, not just a tax structure. Once different family members hold shares, you are dealing with real life: differing views on money, expectations about distributions, changes in relationships over time, and generational differences around risk and responsibility.
Common friction points include adult children expecting regular dividends vs. parents wanting to reinvest, divorce settlements involving FIC shares, one family member wanting to exit their shareholding, and disagreements about investment strategy.
HMRC scrutiny means it needs to be genuinely appropriate
FICs are legitimate structures, but they are not something to do for the sake of it. If the planning is overly aggressive, poorly documented, or doesn’t match the commercial and family reality, it could create risk.
The safest approach is to make sure the structure is appropriate for your circumstances, properly set up and maintained, supported by professional advice, and aligned with your long-term goals, not just a tax outcome.
Family Investment Company vs Trust: What’s the Difference?
A Family Investment Company and a trust can both support long-term family wealth planning, but they work in very different ways.
The main difference: a trust is a legal arrangement, while a Family Investment Company is a corporate structure.
What is a trust?
A trust is a legal structure where assets are held by trustees for the benefit of beneficiaries. Once assets are placed into a trust, the control and decision-making sits with the trustees, who must act in line with the trust deed.
While the settlor (the person putting assets in) can be a trustee, the trust structure still creates legal duties and restrictions that can feel different from direct personal ownership.
What makes a Family Investment Company different?
A FIC is a company, so control comes through directorship, voting shares, and company rules about dividends, transfers and decision-making.
Instead of handing assets into a trust, you are using a company structure to decide who controls investment decisions, who benefits from growth, when money is distributed, and how wealth is passed down.
For many families, that feels more familiar and flexible, particularly where parents want to keep oversight while gradually bringing the next generation into the picture.
Which tends to suit which?
A trust can suit families who want a clear legal framework, trustees to act independently for beneficiaries, stronger separation between the founder and the assets, and protection for younger or vulnerable beneficiaries.
A FIC can suit families who want more flexible control through directorship and voting shares, tailored share structures that separate control from benefit, and a way to keep assets “within the family system” while still planning for succession.
Neither is automatically better. The right answer depends on the family dynamic as much as the tax position.
Tax considerations
Trusts can face 10-year anniversary charges, exit charges when assets leave the trust, and higher tax rates on income and gains.
A FIC is taxed as a company, which could sometimes be more efficient when profits are being reinvested. But a FIC also has the risk of double taxation when profits are extracted.
The key point: the tax outcome depends on the wider plan, not just the structure.
How Much Does a Family Investment Company Cost?
A Family Investment Company can be expensive to set up and maintain, which is why it is usually only considered once a family has reached a certain level of wealth.
What you are paying for
To set it up properly, you need professional support across legal (company structure, share classes, restrictions), tax (funding route, gifting strategy, estate plan interaction), financial planning (investment strategy, cashflow planning), and accountancy (reporting, accounts, compliance).
Typical setup costs: £3,000 to £10,000 + depending on complexity.
Ongoing annual costs: £2,000 to £5,000 + for accounts, filings, and reviews.
Why FICs are often only suitable above £2 million
FICs tend to be considered for families with assets of £2 million or more because the cost and complexity can be disproportionate below that level.
At higher wealth levels, the potential value could come from long-term inheritance tax planning benefits, managing reinvested growth more efficiently, and bringing governance and clarity to multi-generational wealth.
At lower levels, similar outcomes can often be achieved with simpler planning like pensions, ISAs, and gifting strategies.
How an Independent Financial Adviser Can Help with a Family Investment Company
A Family Investment Company is a structure you build around your wealth and family, not a product you simply put in place and forget.
As an Independent Financial Adviser in Dorset, I help families keep it purposeful, practical, and joined up.
An IFA will start by testing whether a FIC is genuinely suitable: your likely inheritance tax exposure, what you want to achieve (control, legacy, flexibility, income), whether simpler options could meet the same goals more cleanly, and whether the ongoing cost and admin will feel worth it over time.
Many families discover that better outcomes could be achieved through maximising pension contributions, using ISA allowances effectively, strategic gifting, business exit planning, or trust structures. An Independent Financial Adviser in Bournemouth or Poole can help you compare these options objectively.
A FIC works best when it supports the bigger picture, including retirement planning, cashflow planning, investment strategy, and wider estate planning intentions. Without this joined-up approach, a FIC can become an expensive structure that doesn’t deliver the outcomes you’re hoping for.
We work with trusted solicitors and tax advisers in Dorset and Hampshire to ensure families get coordinated advice, not conflicting recommendations. A FIC should be reviewed as circumstances shift: tax rule changes, retirement plans evolving, major family events, business exits or windfalls, and changes in health or life expectancy.
Speak to an Independent Financial Adviser in Dorset About Family Investment Companies
Choosing whether a Family Investment Company is right for your family is not always straightforward. The structure affects far more than just tax. It shapes your control, your flexibility, and what you will rely on financially as wealth moves between generations.
At Baggette + Co. Wealth Management, we support business owners and families across Dorset and Hampshire with independent financial planning that brings clarity to these decisions. As an independent and Chartered firm, we take a whole-of-market view and help you understand how a FIC fits into your wider plan, including pensions, investments, cashflow planning and longer-term legacy goals.
Whether you are exploring a Family Investment Company, trust structures, or simply want to understand your options, the right plan gives you peace of mind. It helps you move forward without relying on assumptions or leaving important decisions until they feel urgent.
If you would like to explore whether a Family Investment Company could work best for you, speak to Keith Baggette on 01202 676 983 or email [email protected].
FAQs about Family Investment Companies
There isn’t an official minimum, but a Family Investment Company is usually only worth considering once a family has significant investable assets, often around £2 million or more. Below that level, the setup costs, ongoing admin and professional fees can outweigh the benefits, and simpler planning routes may achieve the same outcome with less complexity.
A Family Investment Company can hold property, but it needs careful planning. Property inside a company can bring additional tax considerations and admin, and transferring an existing property into a company can trigger tax consequences. Explore this with a tax adviser and solicitor before any decisions are made.
Inheritance tax planning is a common reason, but not the only one. Many families also consider a FIC for retaining control while planning for long-term wealth transfer, bringing structure and governance to family wealth, managing how and when family members benefit from growth or income, and creating flexibility around distributions. The best FIC plans are built around outcomes, not just tax.
A FIC is taxed as a company, so it pays corporation tax on profits. If money is then extracted by shareholders through dividends, personal tax may also apply. That interaction is one of the reasons advice is so important, because the structure needs to reflect how profits will be used.
Not really. A FIC needs proper governance and ongoing admin, including accounts, filings and documentation around dividends and any director’s loan. It should also be reviewed as family circumstances and tax rules change. Families who want minimal involvement are usually better served by simpler structures like pensions and ISAs.
A FIC might be worth exploring if you have significant assets, inheritance tax is likely to be relevant, and you want a structured way to plan for long-term family wealth while retaining control. A FIC is less likely to be right if your planning goals can be met through simpler routes, or if you want minimal admin. A short planning conversation with an Independent Financial Adviser can help you sense-check whether it’s worth exploring further.
A FIC is a company structure with directors, shareholders and company tax treatment. A trust is a legal arrangement where trustees hold assets for beneficiaries. The key differences are around control (FICs often allow more flexible family control), taxation (different tax rules apply), and admin (both have ongoing requirements but in different forms). Neither is automatically better – it depends on your family circumstances and goals.
Setting up a FIC involves taking professional advice from an Independent Financial Adviser, solicitor, and tax adviser, designing the company structure, deciding on the funding route, registering the company with Companies House, setting up accounts, implementing the investment strategy, and maintaining ongoing compliance. This is not a DIY exercise.
Yes, FIC structures can be amended, but changes need to be handled carefully. You could potentially issue new share classes, change the articles of association, alter dividend policies, or restructure loans. However, any changes need professional advice to ensure they don’t trigger unintended tax consequences.
For business owners planning to exit, a FIC could provide a tax-efficient structure to hold sale proceeds, particularly if inheritance tax is a concern. Rather than holding proceeds personally (where they sit in your estate), proceeds could be invested through the FIC with future growth potentially accruing to the next generation. This needs to be planned alongside your business exit strategy.
DISCLAIMER:
Baggette + Co. Wealth Management is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate estate planning, tax advice, trust and cash flow planning. The above information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice or legal advice. Capital is at risk. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement. Tax rules may change, and the value of tax reliefs depends on your individual circumstances. Your property could be repossessed if you do not keep up repayments on a mortgage, or any debt secured on it.