Family Investment Company UK

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Last Updated on 2 July 2026

A Family Investment Company (FIC) is a structured way for families to hold, manage and pass on wealth in a controlled and tax‑aware manner.

In the UK, FICs are increasingly used as an alternative to traditional trusts, particularly where families want to retain control while planning for long‑term succession.

This guide explains how Family Investment Companies work, why they are used, and the practical considerations involved in setting one up and running it effectively.

What is a Family Investment Company?

A Family Investment Company is a private limited company established to hold and grow family wealth.

At its simplest, a FIC operates like any other company. What makes it distinctive is how it is structured and owned. The company is typically funded by senior family members and shares are issued across generations.

Key features of a FIC

  • The company holds investments such as cash, property portfolios or investment funds
  • Family members hold shares, often in different classes
  • Control is usually retained by the founders through voting rights
  • Income and capital can be distributed flexibly

Alphabet shares explained

Alphabet shares are different classes of shares (for example A, B, C shares) with varying rights. These can be used to:

  • Allocate income to specific individuals
  • Control voting power
  • Manage how capital is distributed

This structure allows ownership, control and benefit to be separated in a way that supports long‑term planning.

Why is a Family Investment Company important?

A FIC can play a key role in succession and tax planning. It enables families to plan for the future without immediately giving up control of assets.

Core benefits

1. Succession planning
A FIC allows value to be passed to the next generation over time while founders retain control of decisions.

2. Tax efficiency
Companies are subject to corporation tax, which may be lower than higher rates of personal tax. This can support long‑term investment growth.

3. Control and flexibility
Directors manage how and when funds are distributed, allowing decisions to adapt as family circumstances change.

4. Centralised investment management
Assets are held in one structure, improving oversight and governance.

How does a Family Investment Company work?

A FIC works by combining company law with tax planning principles.

Typical structure

  1. Incorporation
    A new company is formed with tailored articles of association
  2. Funding the company
    The founders inject capital, often through:
    • Cash subscriptions
    • Loans to the company
  3. Issuing shares
    Shares are allocated across family members, often using alphabet share classes
  4. Investment activity
    The company invests in assets such as:
    • Property portfolios
    • Listed investments
    • Cash and bonds
  5. Distribution of profits
    Dividends can be paid to shareholders depending on the class of shares they hold

This structure enables families to grow wealth within a corporate wrapper while controlling how and when value is extracted.

Example: A Family Investment Company in practice

A couple establishes a FIC to hold £1 million of investments.

  • They subscribe for voting shares, retaining control
  • Their children are given non‑voting shares with rights to future income
  • The company invests in a diversified portfolio
  • Profits are taxed at corporation tax rates
  • Dividends are paid to children once they reach adulthood

This allows the parents to retain control while gradually passing economic value to the next generation.

Factors that affect how a FIC is structured

The effectiveness of a FIC depends on how it is designed. Key factors include:

Tax considerations

  • Corporation tax rates versus personal tax rates
  • Dividend tax implications for shareholders
  • Potential inheritance tax exposure
  • Anti‑avoidance rules

Family circumstances

  • Number and age of family members
  • Future financial needs
  • Appetite for control and governance

Investment strategy

  • Type of assets held
  • Risk profile
  • Income versus capital growth objectives

Governance

  • Director responsibilities
  • Decision‑making processes
  • Shareholder rights

A poorly structured FIC can lead to unintended tax consequences or family disputes, so careful planning is essential.

How to set up a Family Investment Company

Setting up a FIC involves several steps and professional input.

Key steps

  1. Define objectives
    Clarify succession, control and tax planning goals
  2. Design the structure
    Determine share classes, voting rights and ownership
  3. Draft legal documentation
    Prepare bespoke articles of association and shareholder agreements
  4. Incorporate the company
    Register the company with Companies House
  5. Fund the company
    Introduce capital or loans
  6. Implement investment strategy
    Establish how funds will be managed and invested
  7. Ongoing compliance
    Maintain company accounts, tax filings and governance procedures

A coordinated approach between tax advisers, legal specialists and investment professionals is typically required.

Tax Treatment of Family Investment Companies

Understanding tax is central to assessing whether a FIC is appropriate.

Corporation tax

Profits within the company are subject to corporation tax, which can be lower than higher personal tax rates.

Dividend tax

When profits are distributed, shareholders pay dividend tax at their personal rates.

Inheritance tax (IHT)

A FIC can support inheritance tax planning by:

  • Freezing the value in the founders’ estate
  • Passing future growth to the next generation

However, careful structuring is needed to ensure intended outcomes are achieved.

Advantages and disadvantages of a FIC

Advantages

  • Flexible income distribution
  • Retention of control by founders
  • Potential tax efficiency for retained profits
  • Clear structure for long‑term planning

Disadvantages

  • Ongoing administrative and compliance costs
  • Less favourable tax treatment for certain investments
  • Dividend tax on extraction
  • Complexity compared to holding assets personally

FICs are not a one‑size‑fits‑all solution and must be considered in the context of wider financial planning.

Family Investment Company vs Trust: key differences

FICs are often compared to trusts as a succession planning tool.

Family Investment Company

  • Corporate structure
  • Greater control retained by founders
  • Transparent governance
  • Taxed under corporation tax regime

Trust

  • Legal arrangement rather than a company
  • Trustees control assets
  • Established inheritance tax framework
  • Potentially higher ongoing tax rates

The choice depends on priorities such as control, flexibility and tax efficiency.

When should you consider a Family Investment Company?

A FIC may be appropriate where:

  • You have significant surplus capital to invest
  • You want to pass wealth to future generations gradually
  • You wish to retain control over decision‑making
  • You are comfortable with corporate structures and compliance

Early planning is often beneficial, particularly where long‑term growth is expected.

Family Investment Company FAQs

What is a Family Investment Company in the UK?

Are Family Investment Companies tax efficient?

How does a Family Investment Company help with inheritance tax?

What are the risks of a Family Investment Company?

Is a Family Investment Company better than a trust?

Who should consider setting up a Family Investment Company?

Get in Touch

A Family Investment Company can be an effective tool for managing and transferring wealth within a family. It offers flexibility, control and potential tax advantages when structured correctly.

However, it is not suitable for every situation. The design and implementation of a FIC should reflect your specific family, financial and tax circumstances.

Professional advice is important to ensure the structure is appropriate, compliant and aligned with your long‑term objectives.