Trusts have long been a vehicle for future-proofing investments in the UK. However, there has been a shift in interest for securing property investment and succession planning. Family Investment Companies (FICs) are very quickly becoming the go-to option for wealth management and succession planning among UK families. FICs and Trusts are quite similar, but the flexible structure and tax advantages of FICs are making them a popular choice among investors and families. Still, is FIC the right choice, or should you stick with trusts?
This generally depends on the investment structure, goals and planning of an investor. Sit tight as we dig deeper into why family investment companies are gaining popularity in 2025 and if this could be the right investment choice for you.
What is a Family Investment Company (FIC)?
A Family Investment Company (FIC) is a company owned privately for the purpose of wealth management and effective succession planning. It is typically an investment vehicle designed to preserve assets and one day be able to pass on those assets to future generations.
One of the primary reasons for a FIC to gain its popularity is that it does not trigger an immediate IHT charge upon transfer of value from older to younger generations. In addition, FIC can help safeguard a family’s wealth from the younger generation using it unwisely or losing it through insolvency. Other than that, there are various other reasons that might make FIC the perfect investment choice to future-proof your assets.
FIC vs Trust: What's the Difference?
Planning to pass down the wealth to younger generations is a milestone for every person. During this process, many often face a choice: setting up a Trust or forming a Family Investment Company (FIC). While both may serve similar purposes, they can differ significantly in terms of structure, taxation, control, and other aspects.
The table below outlines the key difference between an FIC and a Trust:
Particulars | Family Investment Company (FIC) | Trust |
|---|---|---|
Legal Structure | FIC is a private limited company registered with Companies House. | Trust is a legal arrangement between a settlor, trustees, and beneficiaries. |
Control | Shareholders holding voting rights (usually parents) have the ultimate authority over company decisions, making them the controlling party regardless of dividend entitlements | The settlor is the person who creates the trust and transfers assets into it. The trustees are responsible for managing those assets in accordance with the terms of the trust. The beneficiaries are the individuals entitled to benefit from the income or assets held in the trust. |
Beneficiaries | Shareholders with dividend and capital rights, which is usually given to children benefit through dividend and asset value. | The named beneficiaries (including minors, unborn children, and vulnerable individuals) benefit as per the trust deed. |
Tax Treatment | FICs are usually liable for Corporation Tax on profits (19 to 25%), while potential dividend tax may apply on distributions to individuals. | Trusts may trigger IHT upon setup (if above the nil-rate band), at 10-year anniversaries, and on exit events. CGT may also apply when assets are transferred in or out of the trust. Trusts are also liable for income tax on income generated from trust assets. |
Inheritance Tax (IHT) Efficiency | If property structured, FIC do not trigger an immediate IHT on transfer of assets. Additionally, gifting shares can reduce the IHT over time if held for 7 years (Potentially Exempt Transfer). | |
Privacy | Accounts and shareholders are disclosed publicly via Companies House. | There is no requirement to publish financial accounts, so trusts are generally private. |
Setup & Administration | The complexity of setting up an FIC depends on its intended use, such as multi-generational planning, wealth management, or tax structuring. More sophisticated objectives require tailored advice and documents. | The administrative burden varies by trust type, but typically includes accounting duties, compliance with trustee laws, and registration requirements. |
Flexibility | FICs offer structural flexibility through multiple share classes with distinct voting, dividend, and capital rights. However, changes usually require formal procedures and may have tax implications. FICs must comply with company law and corporate governance obligations. | Discretionary trusts allow significant flexibility in distributing income or capital. Though interest-in-possession trusts are less flexible, many modern trust deeds allow adaptability via trustee powers, variations, or letters of wishes. |
How Does a Family Investment Company Work?
FIC is a strategic estate and wealth planning structure that allows families to manage, protect, and grow assets in a tax-efficient manner. However, due to limited information about the FIC framework, many individuals are often confused about how it works and how it is set up. So, here is a step-by-step guide on how Family Investment Company (FIC) works:
Can a FIC Buy Property?
Yes, a Family Investment Company can buy property. In fact, many FICs are used specifically for this purpose: holding and managing Buy-to-Let portfolios, commercial real estate, or even holiday lets. The property is owned by the company rather than the individual, which allows for tax-efficient rental income, potential reliefs on loan interest, and structured wealth transfer. However, transferring existing property into an FIC may trigger Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT), so professional advice is essential.
How Much Does It Cost to Set up a Family Investment Company?
The cost of setting up a Family Investment Company in the UK varies depending on complexity. At a minimum, incorporation through Companies House is inexpensive (as little as £12). However, most families require:
- Bespoke Articles of Association
- Shareholder agreements
- Specialist tax planning
- Legal and accountancy advice
In practice, professional fees to set up a fully tailored FIC typically range from £3,000 to £20,000. Ongoing annual costs for accounting, tax returns, and Companies House filings may add £1,000 to £3,000 per year.
Junior ISA vs FIC for Your Children?
A Junior ISA is a simple, tax-efficient way to save for a child’s future, offering tax-free returns on savings and investments. However, it comes with strict contribution limits (£9,000 for 2025/26). Nonetheless, the child gains full access at age 18 regardless of maturity or readiness.
In contrast, an FIC allows:
- Greater control over access
- Unlimited growth potential
- Strategic wealth planning
While Junior ISAs are ideal for modest savings, FICs are better suited for high-value family assets and long-term succession planning. Many families use both: a Junior ISA for short-term savings and a FIC for larger investments.
The Bigger Picture: FICs vs Top Investment Trusts in 2025?
Top investment trusts in the UK continue to deliver reliable returns, particularly in sectors such as global income, infrastructure, and technology. These trusts offer diversification, professional management, and liquidity, making them excellent choices for retail investors.
However, unlike FICs, investment trusts:
- Do not allow bespoke family control
- Cannot offer structured succession planning
- Provide no IHT efficiency on personalised share structures
For families seeking to balance growth with intergenerational control, an FIC provides a tailored alternative that investment trusts cannot replicate.
Conclusion: Are FICs the Future of Family Wealth Planning?
Family Investment Companies are redefining how UK families manage wealth, offering a powerful blend of control, tax efficiency, and inheritance planning. As financial planning becomes increasingly sophisticated, FICs provide a flexible and future-proof solution for those with significant assets.
Whether used alone or in conjunction with trusts and ISAs, a well-structured FIC can serve as a cornerstone for your family’s long-term financial legacy.
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