Why Are High-Net-Worth New Property Investors Turning to Family Investment Companies?

Following last year’s Budget and this year’s Spring Statement, more and more high-net-worth families have been taking up Family Investment Companies (FICs) due to their desire to avoid rising bills of Inheritance Tax, with tax advisers reporting a sudden increase in demand since the recent announcements.

The demand is being driven by concerns over the government's proposed Inheritance Tax overhaul, including introducing unspent pension pots from 2027. With tax bands locked and still more estates to fall into the trap, FICs are becoming an increasingly popular estate planning vehicle for high-net-worth individuals.

What Do Family Investment Companies Provide Property Investors?

Family Investment Companies allow families to pass wealth into a company structure, offering a balance between gifting and not losing control. Compared to trusts, such companies allow parents to retain decision-making power while passing value to children in the long term in the form of shares or loans.

This seems pertinent given the current trends. By the end of the decade, nearly one in ten deaths is expected to trigger an Inheritance Tax bill, according to the Office for Budget Responsibility.

Currently, estates valued above the £325,000 nil-rate band – or £650,000 for couples – are subject to a 40% tax on the excess. While homeowners passing on their main residence can benefit from an additional allowance, many large estates still face significant liabilities.

Why Are High-Net-Worth Families Looking to Family Investment Companies?

Wealth managers say interest in Family Investment Companies has risen sharply among wealthier families. Partly, this appeal is because of the way FICs are treated for tax. Unlike trusts, where there is the possibility of a 20% charge on gifts above the nil-rate band over seven years, there is no cap on the amount of wealth that can be transferred through FICs.

An industry expert said that no lifetime Inheritance Tax charges arise on transferring sums, irrespective of the value transferred. Provided the founder survives for seven years, amounts held within an FIC fall outside their estate.

FICs are particularly attractive to families with significant liquid assets. While set-up costs can vary, fees typically range from £5,000 to £20,000 depending on whether clients choose a bespoke legal arrangement or an off-the-shelf version.

Despite the upfront costs, the long-term savings can be substantial. FICs pay Corporation Tax at 25% on income, compared to personal Income Tax rates that can reach up to 45% for top earners.

The ongoing tightening of the Inheritance Tax rules, combined with higher Capital Gains Tax rates, has driven more interest in Family Investment Companies, especially when people hold considerable cash or investments. This is because FICs can mimic many of the benefits of a trust without triggering immediate charges. Parents can pass on value without losing control, and avoid the upfront 20% charge that can come with trust gifts.

Conclusion

With Inheritance Tax thresholds frozen and further reforms on the horizon, many wealthy families are reassessing their estate planning strategies. While Family Investment Companies are not suitable for everyone, they are increasingly the preferred option for those seeking tax efficiency, flexibility, and control across generations.

As demand increases, financial and legal professionals expect FIC usage to continue expanding—especially if the government’s proposed tax reforms in 2027 come to fruition.