Guest Blog: Family Investment Companies – A Modern Tool for Succession Planning By Amanda Bailey, Partner at Brabners LLP
At F&O Wealth, we regularly work with families looking for effective, tax-efficient ways to manage wealth, support their children and grandchildren, and plan for the future. One increasingly popular option is The Family Investment Company (FIC).
To unpack how FICs work and why they might be right for your family, we’re joined by Amanda Bailey, Partner at Brabners LLP in Liverpool. Amanda specialises in tax, trusts, and succession planning. With years of experience advising business owners and high-net-worth families, she’s the perfect person to introduce this growing strategy, she’s also a great friend of ours at F&O.
So, What Is a Family Investment Company?
At its core, a Family Investment Company is simply a limited company set up to hold and grow family wealth — typically through investments in shares, property, or cash, rather than running a trading business.
There’s no official HMRC definition of a FIC because they can be tailored in many ways. But most have a few key features:
Family members are shareholders – usually across at least two generations.
Different share classes are used to split voting rights and economic benefit.
The company doesn’t trade – it holds investments instead.
Control remains with the older generation, while younger generations benefit from income or capital growth over time.
Crucially, FICs offer many of the benefits of a trust but in a structure that’s often more familiar to business owners — and more flexible for long-term planning.
Why Use a FIC Now?
There’s renewed interest in FICs due to forthcoming changes to Business Relief (BR) and Agricultural Relief (AR) under the Inheritance Tax (IHT) regime — set to come into effect in April 2026.
Many families are taking action now to:
Protect assets from future IHT charges;
Reorganise their wealth in a more flexible structure;
Retain control while gradually involving the next generation.
FICs can also be an effective alternative to discretionary trusts, which now come with high tax rates (up to 45% on income, or 39.35% on dividends) and more stringent compliance requirements under the Trust Registration Service.
Real-Life Example: Jim and Jane’s FIC
To bring this to life, meet Jim and Jane, recently retired business owners with £1 million in cash from the sale of their company. They’re financially secure, but keen to:
Pass wealth to their children and grandchildren,
Retain control over the assets,
Avoid unnecessary Inheritance Tax,
And keep things as simple and transparent as possible.
Here’s the FIC structure they set up:
£1 million is transferred into a newly created Family Investment Company.
Jim and Jane each retain 20% of the shares, along with their roles as directors.
Their two adult children each receive 20% of the shares, with voting rights but crucially only a minority — this gives them a stake in the future value, without control today.
The final 20% is placed into a discretionary trust for their grandchildren of which Jim and Jane are trustees — perfect for funding education, future property purchases, or other life milestones.
If set up correctly, the shareholding retained by Jim and Jane, at only 40%, should attract a substantial minority discount on its face value, but they retain control of 60% of the overall voting rights of the FIC through their personal holding and the shares they control as trustees.
Why This Structure Works
Jim and Jane’s setup is a great example of how a FIC can deliver powerful long-term benefits:
After seven years, the £600,000 given away is fully excluded from their estate for IHT — saving up to £240,000 in tax at current rates. In addition, the 40% they retain is worth less than its face value of £400,000. Applying a 50% minority discount, this would represent a further £80,000, immediate, IHT saving.
The transfer into the trust will be a Chargeable Lifetime Transfer (CLT) so the key component is to keep the value of that CLT below the £650k joint Nil Rate Band to prevent an immediate IHT charge.
As directors and shareholders, Jim and Jane retain full control over investment decisions and distributions because of their 40% voting rights over the shares they retain AND the 20% they control as trustees of the trust.
- The company pays Corporation Tax at 19% - 25%, which is lower than trust income tax rates.
- Dividends between companies (e.g., from a traded shares into the FIC) are generally tax-free.
- If they ever need to access funds, Jim and Jane can draw a dividend on the 40% shareholding they retain. They can also consider using directors’ loans — a more income-tax-efficient way to draw funds than taking large personal dividends.
Key Considerations
Family Investment Companies offer a lot of advantages — but they aren’t right for everyone. Here are some of the pros and cons to consider:
Advantages:
Keeps control with the older generation.
Offers lower tax rates on retained profits.
Enables flexible gifting and education planning.
Can offer some protection in divorce scenarios.
Useful for succession planning across multiple generations.
Challenges:
Not simple to reverse — this is a long-term structure.
Costs can add up — legal, accounting, and valuation input may be needed.
Careful planning is needed to avoid traps around share classes, close company rules, loss to estate rules, settlements legislation and other anti-avoidance legislation; this is an area where it is a false economy not to take appropriate expert advice!
Funds are locked in — personal access triggers income tax unless structured correctly (e.g., directors’ loans).
Pre-April 2026 Planning Opportunity
With the government’s proposed cap on BR and AR coming into effect in 2026, now is the time to take action. If you're holding interests in trading businesses, transferring them into a FIC or trust structure before the rules change could avoid significant future IHT charges.
This is especially important for families considering the sale of a business or restructuring a sole trader or partnership arrangement.
Final Thoughts
FICs are not just for the ultra-wealthy — they’re for any family thinking long-term about how to preserve, grow, and eventually pass on wealth with care. With the right planning, they offer control, flexibility, and tax efficiency in one neat package.
If you’re a family business owner or simply thinking ahead, now is a great time to explore whether a Family Investment Company could be the right fit.
Thanks again to Amanda Bailey of Brabners LLP (https://www.brabners.com/) for her expert insights. To discuss how a FIC might work for your family, get in touch today.
This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
The taxation of the investment is dependent on the individual circumstance of each investor, and may be subject to change in the future.
The Financial Conduct Authority (FCA) does not regulate Inheritance Tax Planning or Trust Advice.