A family investment company (FIC) is a private limited company that holds and grows investments for a family. It does not run a medical practice. If your income is already in the additional-rate band and there is surplus wealth beyond the NHS pension and the ISA allowances, a FIC can hold investment income at the 25% corporation-tax main rate and move future growth outside your estate for inheritance tax. Held personally, that same income carries 45% income tax.
Whether it earns its keep is a fit question, and the answer turns on how much surplus there genuinely is, who else in the family can receive income, how long the horizon runs, and what you want to happen to your estate. This guide gives you the tax, the share classes, the inheritance tax position after 6 April 2027, and the disadvantages that settle most cases.
What a family investment company actually is
A FIC is not a trading company and does not hold an NHS GMS or PMS contract. It is a bespoke private limited company built to hold investments: listed shares, bonds, cash deposits, property, or a mix of them. You own it with your family through separate classes of shares carrying different dividend, voting and capital rights.
You will find family investment companies described in the market as an FIC company, an investment holding company or a family holding company, and they are the same idea. You would normally hold the shares carrying voting control, while a spouse or adult children hold shares carrying dividend or capital rights with limited votes or none at all.
Because your shareholders sit at different marginal rates, the structure lets income flow to whoever can receive it most cheaply in a given year. The inheritance tax angle runs the other way: shares you give away leave your estate once you have survived seven years.
Point the company at residential property instead of listed investments and your entry cost changes sharply. SDLT is charged at 17% on residential property costing more than £500,000 bought by a company or other non-natural person (FA 2003 Sch 4A para 3), a rate that has applied since 31 October 2024, and the company may also fall within the Annual Tax on Enveloped Dwellings. Rental profits are then taxed inside the company.
One comparison to set aside before you go further. A trading private-practice company can qualify for Business Asset Disposal Relief, and incorporating a practice is a different decision with its own sequence and its own pension consequences, which the step-by-step incorporation guide takes you through.
Why a high-earning consultant or GP partner looks at one
The first trigger is the additional-rate threshold of £125,140 (2026/27). Above it you pay 45% income tax on further income, and the personal allowance has already been tapered away on the climb, which is covered on the adjusted net income page. A company holding the same income pays the 25% main rate on all of it, which keeps 20 percentage points more, before anything is taken out of it.
The second trigger is the annual allowance: once your income is high enough for it to taper, your pension stops absorbing surplus and that surplus has to go somewhere, and the mechanics sit on the NHS pension annual allowance calculator.
The population this describes is narrow. The NHS pension is funded, the pension allowances available have been used, and there is still surplus that would otherwise compound in a personal account taxed at the top rate. If most of your income is NHS salary or partner drawings at the higher rate, the pension is still doing the work.
Surplus that is already sitting inside a trading medical company is a different question with different answers, and it is covered on surplus cash in a medical limited company.
How a FIC is taxed
Your company pays corporation tax on the investment income it retains, and the rate is worse than the FIC marketing suggests. A close company whose business is holding investments is a close investment-holding company (CTA 2010 s.18N), and CTA 2010 s.18A(1)(b) makes the small profits rate available only to a company that is not one. So a FIC holding a share portfolio gets no small profits rate and no marginal relief: it pays the 25% main rate on all of its taxable profits, from the first pound. The exception is a FIC whose business is wholly or mainly the commercial letting of land to unconnected persons, which s.18N leaves outside the definition, so that company keeps the ordinary 19% to 25% scale with marginal relief between (standard fraction 3/200, an effective rate of around 26.5% inside the band).
Dividends your company receives are normally exempt from corporation tax under the distributions exemption in CTA 2009 Part 9A (s.931A onwards), so income that has already borne corporation tax in the paying company is not taxed again on the way in. Interest, rents and other receipts are taxed at the full rate.
That exemption is real, and it does not settle the question, for two reasons worth holding on to. The money is still inside the company and reaches you only through the extraction route. And holding a portfolio makes the company an investment company, which costs it business relief entirely.
The extraction rates themselves are the other half of the arithmetic and they belong on the salary versus dividend guide, which sets out the 2026/27 dividend rates, the dividend allowance and how the salary and dividend routes compare for a director.
The table below takes £50,000 of interest income, taxable inside the company at the full rate rather than exempt, and follows it down four routes in 2026/27. The amounts are illustrative and rounded to the nearest £10; every rate is a 2026/27 rate.
| Route | Tax on £50,000 interest income (2026/27) | Net retained or received | Note |
|---|---|---|---|
| Additional-rate doctor, personally (45% IT) | £22,500 | £27,500 personally | No deferral; compounding on £27,500 |
| FIC retains (CT 25%, not extracted) | £12,500 | £37,500 in company | Compounding on £37,500; extraction taxed later on the founder or a family member |
| FIC then extracts to basic-rate spouse | £12,500 CT + £2,630 dividend tax (10.75% on £24,430) | £34,870 net to spouse | Assumes the spouse has no other income at all, so the £12,570 personal allowance and the £500 dividend allowance both cover part of the £37,500; £7,370 better than the personal route |
| FIC then extracts to additional-rate founder | £12,500 CT + £14,560 dividend tax (39.35% on £37,000 after the £500 allowance) | £22,940 net to founder | Combined tax 54.1% on the original income: worse than the 45% personal route |
Read the rows in that order and the shape of the structure appears. Retaining income inside the company and deferring the extraction beats holding the same income personally by a wide margin. Redirecting it to a family member with basic-rate capacity is materially efficient as well.
Passing it straight back to you at the additional rate is not. Corporation tax and dividend tax together come to around 54.1% of the original income, worse than the 45% payable on it personally. A FIC earns its keep through deferral and redirection, never as a pipe back to the founder.
Share classes, freezer shares and growth shares
The share structure is where the planning flexibility lives. A FIC typically uses alphabet shares: A, B and C classes with distinct rights codified in the articles. You would usually hold the A shares with full voting rights, keeping control of investment strategy and corporate decisions, while family members hold B or C shares carrying dividend entitlements and few votes or none.
Because the classes are independent, a dividend can be declared on the B shares without a matching dividend on yours. That is the mechanism behind income redirection, and it is the same mechanism the settlements legislation attacks when the drafting is loose.
Freezer shares and growth shares are the vocabulary for the estate side of the structure. Freezer shares fix your entitlement at today's value, so future growth accrues to the growth shares the children hold and not to the founder. That is a drafting exercise for a solicitor at formation; it does not bolt on comfortably later.
A spouse who genuinely works for the company at a commercial rate can also draw a salary, deductible for corporation tax on the wholly and exclusively basis. Keep it distinct from dividends on their shares: a salary buys real work at a market rate, dividends follow share ownership, and both need documenting properly.
Funding the company
You can put money into a FIC four ways: a director's loan to the company, a subscription for shares in cash, a transfer of assets already held, or a transfer of shares within the family. The route picked matters more than it looks.
A loan is usually the one to understand first, because your own capital stays repayable: the company can return it without declaring a dividend. The loan-account mechanics, including the charges that run in the other direction when a company lends to a director, sit on the director's loan account guide.
Transferring assets you already own carries its own tax consequences at the moment of transfer, and those have to be modelled before you choose the route. Cash is the simplest way in, and it is what most doctors use.
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The inheritance tax angle, and what changes on 6 April 2027
The inheritance tax benefit comes from giving shares away, not from holding them. Gifts of FIC shares made outright to family members are potentially exempt transfers: survive seven years and the value leaves your estate. The seven-year rule is effectively the whole of the plan, for reasons the next section explains.
Over twenty years the compounding on shares you have already given away can move a great deal of value down a generation. Over five it moves very little, which is why the age at which you start matters as much to the outcome as any tax rate on this page.
The gift with reservation rules undo the gift if you keep a benefit from what was given away: drawing a salary the work does not justify, occupying company property, or holding rights over the gifted shares beyond ordinary governance. HMRC can then keep that value in your taxable estate even though the gift was made.
Unused pension funds enter the estate from 6 April 2027
This is the change that makes the whole question live for doctors, and it is enacted law. Finance Act 2026 sections 66 to 71 bring most unused pension funds and pension death benefits into the deceased's estate for inheritance tax, for deaths occurring on or after 6 April 2027.
The exclusions carry most of the answer for you. Death in service benefits payable from a registered pension scheme are out of scope, and so are dependants' scheme pensions from a defined benefit arrangement or from a collective money purchase arrangement. The NHS defined benefit core is not the target of this change, whatever the headlines suggest.
What it does reach is money purchase saving: a SIPP, a personal pension, or money purchase AVCs held alongside NHS membership. If that is where your surplus has been going, the comparison with a FIC shifts, because FIC shares can be given away during a lifetime in a way a pension pot cannot. Personal representatives are liable to report and pay the tax.
Access age belongs in the same thought. The normal minimum pension age is 55 and rises to 57 on and after 6 April 2028 (Finance Act 2022 s.10), unless you held an unqualified right under the scheme rules on 4 November 2021 to take benefits earlier. Money inside a FIC has no access age at all, which is a genuine difference when the plan runs through the fifties.
The disadvantages of a family investment company
Every page selling you the structure leads with the benefits. The disadvantages are what decide the answer for most doctors, and there are four of them.
The settlements legislation
Your income-splitting benefit depends on the different shareholders genuinely holding independent rights. The settlements legislation (ITTOIA 2005 s.619 onwards) treats income arising under a settlement as the settlor's income where the settlor retains an interest in it.
Under s.624, if you keep any entitlement to benefit from the FIC (a right to dividends, a salary, a return of contributed capital or similar), income paid to family members can be taxed as yours. That eliminates the benefit entirely, which is a large sum to lose to a drafting error.
So the practical answer is a drafting one. The A shares must carry rights the founder genuinely intends to keep and benefit from, while the B and C classes must carry rights that are genuinely independent and not a repackaging of that entitlement. Have the articles and the shareholders' agreement reviewed by someone who works with the settlements rules before you sign.
Minor children and the £100 rule
Under ITTOIA 2005 s.629, income arising under a parental settlement and paid to an unmarried minor child is treated as the parent's income where it exceeds £100 per year. If you fund a FIC in which an unmarried minor child holds shares, the dividends above £100 are taxed on the parent as though the parent had received them.
The income-splitting benefit for children under 18 is therefore nil in practice. The rule falls away when the child turns 18 or marries, so FIC planning for adult children can be genuinely efficient, and founders should not be sold the income-splitting story on the basis of minor beneficiaries.
No business relief, at any rate
An investment company is not relevant business property. IHTA 1984 s.105(3) excludes a business consisting wholly or mainly of dealing in securities, stocks or shares, or land, or of making or holding investments, and a FIC holding a portfolio is the plain case of that exclusion. Your shares get no business relief at all.
That matters because business relief is what shelters a trading business from inheritance tax. Where property does qualify, relief at 100% is capped by a £2.5 million combined agricultural and business property allowance for transfers on or after 6 April 2026, with 50% relief on the value above it (IHTA 1984 s.124D). None of it reaches your FIC, which is why the seven-year rule carries the plan on its own.
No Business Asset Disposal Relief, and what that costs you
BADR requires a trading business or trading company held for the qualifying two-year period, with the 5% ordinary share capital, voting and economic-entitlement conditions met on a company disposal. A FIC does not carry on a trade, so any future disposal of your shares is taxed at the main CGT rates without the relief.
Quantify that. BADR is 18% from 6 April 2026 on the first £1 million of qualifying lifetime gains, against a main rate of 24% for a higher-rate taxpayer, so what you forfeit is worth up to 6 percentage points on the first £1 million of gain. It is a permanent structural cost; deferral never recovers it.
The running cost
Bespoke articles with multiple share classes, a shareholders' agreement and advice on the settlements risk typically cost several thousand pounds at the outset. After that you carry annual accounts, a corporation tax return, PAYE if anyone draws a salary, director minutes, dividend paperwork and a share register.
Those obligations are materially heavier than for a straightforward one-director company, and they recur every year whether or not the investments perform. Every dividend you declare needs the settlements question asked again, which is where the ongoing professional cost actually sits.
FIC, a discretionary trust, or simply investing personally
| Feature | FIC | Discretionary trust | Personal investing |
|---|---|---|---|
| Tax on retained income (non-dividend) | CT 25% (close investment-holding company) | Trust income rate up to 45% | Income tax up to 45% |
| Tax on dividends received | Normally exempt from CT (CTA 2009 Part 9A) | Up to 39.35% trust rate | Up to 39.35% additional rate |
| IHT treatment of transfer | PETs on gifted shares; exempt after 7 years | Chargeable lifetime transfer; entry charge above available nil-rate band; 10-year periodic IHT charge on trust assets | No transfer benefit; assets remain in estate |
| Business relief | Not available: IHTA 1984 s.105(3) excludes investment businesses | Not available (investment vehicle) | Available on qualifying trading interests held personally |
| BADR on disposal | Not available (investment company) | Not applicable | Available on qualifying trading assets; not on investment portfolios |
| Control | Founder retains as director and A shareholder | Trustee control; settlor ordinarily excluded as beneficiary | Full personal control |
| Income splitting | Yes, to shareholders with lower marginal rates (subject to settlements legislation) | Yes, at trustee discretion to beneficiaries | No |
| Flexibility over beneficiaries | Fixed by share class; changes require new allotments | Wide trustee discretion over who benefits and when | Not applicable |
| Running cost | Moderate: annual accounts, CT return, legal setup, director governance | Moderate to high: trustee fees, trust accounts, tax returns, reporting to HMRC | Nil beyond personal accounts and ISA |
On retained undistributed income the company still wins: a trust pays income at trust rates that sit close to your personal rates and give no compounding advantage. The trust's strength is flexibility, because trustees choose who benefits and when, whereas share classes are fixed at formation and changing them means new allotments.
A trust also faces a periodic inheritance tax charge every ten years on assets above the available nil-rate band, which a FIC does not carry while it holds its investments. Personal investing beats both of them on simplicity and cost. The price is that every year's income is taxed at your top rate, with no 25% company layer to defer behind.
Is a family investment company worth it?
Now you can answer the question the title asks. The honest answer is a fit test, and it turns on four conditions. Ask whether all four of these are true, because the structure only pays for itself when they are:
- You have genuine surplus, several tens of thousands of pounds a year or more, that you can leave to compound inside the company for years at a time.
- Family members (a spouse with lower income, adult children over 18) will hold shares and can receive dividends at lower marginal rates, so extraction is efficient when it happens.
- There is a real inheritance tax goal, a willingness to gift shares, and a realistic prospect of surviving seven years so those gifts fall out of the estate.
- Your horizon is long: set one up at 45 and hold it for twenty years and the compounding and the estate benefit are both material; set one up five years before retirement and neither is.
Fail one of the four and the arithmetic usually stops working. Fail the first, and you are paying several thousand pounds a year in professional fees to shelter a sum that does not justify them.
For a consultant of 45 with growing private income, a long horizon, a spouse with basic-rate capacity and a clear family-wealth goal, a FIC can be a powerful structure. For a consultant of 58 with good but not exceptional private income and no pressing succession plan, the running cost will very likely outweigh the benefit.
If the real question is your trading company and not an investment one, GP limited company tax benefits and drawbacks covers that decision, and private practice tax and the NHS and private income split frames where a FIC sits against your overall income mix. The full range of tax services for consultants is on the for consultants page.
This guide is general information on tax and company structure. It is not personal advice, and nothing here is advice on investments or on which assets a company should hold. A FIC needs a solicitor to draft it and specialist tax input before anyone commits to it. If you want the numbers run on your own position, the short contact form below is the place to start.