A family investment company (FIC) is a private limited company set up to hold and grow family money and investments, with family members owning the shares. It is used as a way to pass wealth down the generations while the founders keep control of how that wealth is managed, and it is often considered as an alternative or a complement to a trust.
This guide explains how a family investment company works in England and Wales, how it is taxed, what it costs to run, and where the drawbacks sit. It is general information rather than advice, and every family's position is different. Figures are current as at August 2026 and are subject to change.
What is a family investment company?
A family investment company is an ordinary private limited company, registered at Companies House and governed by the Companies Act 2006, whose purpose is to hold investments such as shares, funds and sometimes property on behalf of a family. Instead of owning those assets personally, or settling them into a trust, the founders (typically parents or grandparents) put money into a company and give family members shares in it. Profits and growth then build up inside the company.
The appeal, for some families, is a combination of control and long-term planning. The founders can retain the decision-making shares while passing the shares that carry future growth to children or grandchildren. Over time, the growth in the value of the underlying investments accrues to the next generation rather than to the founders' estates. It sits alongside the wider building blocks covered in our estate planning guide, and it is one option among several rather than a default.
How a family investment company works
The mechanics vary, but a common structure looks like this:
- Incorporation. A private limited company is registered at Companies House, with a memorandum, articles of association and often a shareholders' agreement tailored to the family.
- Funding. The founders put money in, usually as a director's loan rather than a gift. A loan can later be drawn back down without a further tax charge, because repaying capital is not income.
- Share classes. Different classes of share can carry different rights. Founders often keep voting shares that control the company, while giving children shares that carry the rights to future dividends and growth.
- Investing. The company invests the funds. Any income and gains arise inside the company and are taxed under the corporation tax rules rather than the personal tax rules.
Because the founders can hold the voting shares, they can stay in control of investment decisions and of when, or whether, money is paid out, even after they have passed value to the next generation.
How a family investment company is taxed
A family investment company is taxed as a company, which is the main practical difference from holding investments personally or through a trust. There are broadly two layers to keep in view: tax inside the company, and tax when money is taken out.
| Layer | Position (as at August 2026) |
|---|---|
| Corporation tax on profits | 19% on profits up to £50,000, 25% above £250,000, with marginal relief between the two (gov.uk, subject to change) |
| Dividends the company receives | Dividends from UK companies are, in many cases, exempt from corporation tax inside the company (HMRC guidance, as at August 2026, subject to change) |
| Dividends paid to shareholders | £500 dividend allowance, then 10.75% (basic), 35.75% (higher), 39.35% (additional) (gov.uk, subject to change) |
| Capital gains on personal disposals of shares | 18% or 24% depending on the individual's income, after the £3,000 annual exempt amount (gov.uk, subject to change) |
The point that draws families to this structure is that profits kept and reinvested inside the company are taxed at corporation tax rates rather than higher personal rates. The trade-off is that extracting money later, as dividends or salary, brings a second layer of tax. Whether that combined position works out favourably depends entirely on the individual circumstances, which is why it is generally modelled with a qualified adviser before anything is set up.
On inheritance tax, the planning idea is that giving shares to the next generation can be a gift for inheritance tax purposes. Outright gifts of shares to individuals are generally potentially exempt transfers, which fall outside the estate if the giver survives seven years, and the future growth on those shares builds up in the children's hands rather than the founders' (gov.uk, gifts and the 7-year rule, as at August 2026, subject to change). Shares in an investment company do not usually qualify for business property relief, so the value transferred is the value of the shares themselves.
Family investment company or a trust?
Families often look at a family investment company and a trust side by side, because both can separate control from benefit and both can pass value down the generations. They are taxed on very different bases. A company is taxed under the corporation tax rules described above. A trust has its own inheritance tax regime, which can include an entry charge, periodic charges broadly every ten years, and exit charges, depending on the type and value of the trust (gov.uk, trusts and taxes, as at August 2026, subject to change).
Neither structure is inherently better than the other. Companies tend to suit larger sums held for the long term, where the founders want a familiar corporate framework and are comfortable with the running costs and the public filings at Companies House. Trusts can offer more flexibility over who benefits and when, and remain widely used. The right answer, if there is one, comes out of the numbers and the family's aims rather than a rule of thumb.
What a family investment company costs
Setting up the company itself is inexpensive. Running it properly, and taking the advice needed to structure it well, is where the real cost sits.
| Item | Amount (as at August 2026) |
|---|---|
| Register a company online at Companies House | £100 (gov.uk, subject to change) |
| Register a company by post | £124 (gov.uk, subject to change) |
| Stamp duty on later transfers of shares (stock transfer form) | 0.5%, and only where the transaction is over £1,000 (gov.uk, subject to change) |
| Ongoing accounts, corporation tax returns and Companies House filings | Annual professional and filing costs, which vary by adviser |
The set-up figures are small, but they understate the true cost. The legal drafting of bespoke articles and a shareholders' agreement, the ongoing accountancy and tax compliance, and the advice to keep the arrangement working as intended all add up. For that reason a family investment company is rarely worth considering for modest sums.
Who might consider a family investment company?
A family investment company tends to be discussed where there is a substantial sum to invest for the long term, where the founders want to keep control of how it is managed, and where they are comfortable with the running costs and the transparency that comes with a company. It is not a mass-market product, and it is not a substitute for the basics. A valid will and a lasting power of attorney still matter, and for many families a well-drafted will and considered gifting achieve their aims without a company at all.
Points that families commonly weigh up include:
- Cost and complexity. The structure carries set-up and ongoing costs, and needs proper legal and tax input.
- Two layers of tax. Profits are taxed inside the company, then again when extracted, so the benefit is not automatic.
- Transparency. Accounts and details of directors and people with significant control are filed publicly at Companies House.
- The seven-year point. Gifting shares only removes value from the estate if the giver survives seven years (gov.uk, as at August 2026, subject to change).
- Getting the will right. The company sits within a wider plan, so it is worth reading alongside how to write a will.
Scotland and Northern Ireland
Company law is broadly UK-wide, so a family investment company can be registered under the same Companies Act 2006 framework across Great Britain and Northern Ireland. Succession and estate law, however, differs. Scotland has its own rules, including legal rights that can entitle a spouse and children to a fixed share of an estate, and Northern Ireland has a separate but broadly similar system to England and Wales. Where an estate touches more than one jurisdiction, it can be worth taking advice in each. This guide describes the position for England and Wales.
- Corporation tax: 19% up to £50,000 of profit, 25% above £250,000, marginal relief between (gov.uk).
- Dividend allowance £500, then 10.75% / 35.75% / 39.35% by band (gov.uk).
- Register a company online: £100; by post: £124 (gov.uk).
- Gifts of shares: potentially exempt, outside the estate after seven years (gov.uk).
- Inheritance tax nil-rate band £325,000, frozen until 5 April 2031 (gov.uk).
Frequently asked questions
What is a family investment company?
A family investment company is a private limited company set up to hold and grow family investments, with family members owning the shares. The founders can keep the shares that control the company while passing the shares that carry future growth to children or grandchildren, so wealth can build up for the next generation while the founders retain control of how it is managed.
How is a family investment company taxed?
It is taxed as a company. Profits are subject to corporation tax at 19% up to £50,000 and 25% above £250,000, with marginal relief in between (gov.uk, as at August 2026, subject to change). When money is taken out as dividends, shareholders have a £500 dividend allowance and then pay 10.75%, 35.75% or 39.35% depending on their income band (gov.uk, as at August 2026, subject to change).
Is a family investment company better than a trust?
Neither is inherently better. A company is taxed under the corporation tax rules, while a trust has its own inheritance tax regime that can include periodic and exit charges (gov.uk, as at August 2026, subject to change). Companies tend to suit larger, long-term sums where founders want a corporate framework, while trusts can offer more flexibility over who benefits and when. The right choice depends on the numbers and the family's aims.
How much does it cost to set up a family investment company?
Registering the company itself is inexpensive, at £100 online or £124 by post at Companies House (gov.uk, as at August 2026, subject to change). The larger costs are the legal drafting of bespoke articles and a shareholders' agreement, and the ongoing accountancy and tax compliance, which vary by adviser. Those costs mean the structure is rarely worthwhile for modest sums.
Can a family investment company reduce inheritance tax?
It can form part of inheritance tax planning, but it does not guarantee a saving. Gifting shares to individuals is generally a potentially exempt transfer that falls outside the estate if the giver survives seven years, and future growth then builds up in the children's hands (gov.uk, gifts and the 7-year rule, as at August 2026, subject to change). Shares in an investment company do not usually qualify for business property relief, so the outcome depends on the full circumstances.
Who typically uses a family investment company?
They are generally considered by families with a substantial sum to invest for the long term, who want to keep control of how it is managed and are comfortable with the running costs and the public filings at Companies House. For many families, a valid will and considered gifting achieve their aims without a company, so it is one option among several rather than a starting point.