Family Investment Companies and Inheritance Tax: A Modern Strategy for Passing on Wealth?
As the UK faces the biggest intergenerational wealth transfer in history, many high-net-worth families are asking the same question:
“How can we pass down wealth without paying unnecessary
Inheritance Tax?”
At Ella Rose Financial, we’re increasingly supporting clients who want to explore Family Investment Companies (FICs) as part of their long-term financial and estate planning strategy.
The Rise of Inheritance Tax Concerns
Inheritance Tax (IHT) in the UK is currently charged at 40% on estates above the nil-rate band, and with property values and investment portfolios on the rise, more families are finding themselves in scope.
Meanwhile, changes to trust taxation and future IHT changes on pensions are prompting wealthy families to reassess how they structure their assets.
That’s why Family Investment Companies are becoming a go-to strategy for those who want control, tax efficiency, and long-term planning.
What is a Family Investment Company (FIC)?
A Family Investment Company is essentially a company structure, typically set up by parents or grandparents to manage and invest family wealth. Assets (often including cash, investments or property) are placed into the company, with carefully structured shareholdings across generations.
It offers a different approach to traditional trusts and can be used as a vehicle for tax-efficient intergenerational wealth transfer.
Key benefits of FICs include:
Retain control over assets while transferring future growth
Potential to reduce inheritance tax exposure over time
Lower corporation tax on investment income
Flexibility in distributing capital to family members
Long-term governance and planning for family wealth
Why Are Family Investment Companies Becoming More Popular?
Several factors are driving interest in FICs:
The Great Wealth Transfer is underway – Baby Boomers are expected to pass trillions of pounds to younger generations in the next two decades.
Trust taxation rules have changed, making them less appealing for some.
Pensions, once outside of IHT, are likely to be drawn into the tax net in the future.
FICs offer an alternative that can align with wider investment and estate planning goals.
For high or ultra net worth families looking to reduce inheritance tax legally, a Family Investment Company could be worth exploring.
Family Investment Companies involve legal and tax complexities and are not suitable for all investors. Professional legal and tax advice should always be taken before establishing a FIC. Tax treatment depends on individual circumstances and may be subject to change. The Financial Conduct Authority does not regulate tax advice.
How Ella Rose Financial Works With Families
At Ella Rose Financial, we don’t believe in one size fits all. We work closely with your tax adviser, solicitor, and legal team to ensure that a FIC, if appropriate, is structured in line with your family’s goals, values, and broader financial plan.
We’ll help you:
Understand how a Family Investment Company could reduce inheritance tax
Review existing trusts, pensions and other structures
Build a cohesive plan to pass on wealth tax-efficiently
Navigate the complexities of succession and control
Important Considerations
Family Investment Companies can be highly effective, but they are complex and not suitable for everyone. Key considerations include:
· Initial setup costs can be significant, particularly when legal and tax structuring is involved.
· Ongoing governance requires careful record-keeping, reporting, and administration—adding complexity compared to more conventional investment arrangements.
· Regular income or withdrawals from the FIC could lead to increased personal taxation, potentially reducing tax efficiency.
· Family dynamics may be impacted—ownership structures, control, and differing expectations can occasionally lead to conflict if not planned carefully.
· They require:
o Legal advice to set up the company structure
o Tax advice on implications for Corporation Tax, CGT and IHT
o A clear succession and control strategy
We’ll bring the right professionals to the table and act as your planning partner throughout.
Protecting Family Wealth for the Future
If you’re looking to reduce inheritance tax and pass on wealth securely to your children or grandchildren, now is the time to take action.
A Family Investment Company may not be a silver bullet, but it could be a valuable tool in a wider strategy – especially in light of current and future tax changes.
Let’s have a conversation about building a plan that protects your legacy.
At Ella Rose Financial, we help families like yours plan with confidence, clarity and care.
This article is for information purposes only and does not constitute personalised financial advice.