Family Investment Company (FIC) Tax Calculator
Model the tax efficiency of a Family Investment Company versus direct investment. Compare corporation tax, dividend extraction, IHT benefits, and effective family tax rates.
FIC vs Direct Investment Tax Comparison
A Family Investment Company (FIC) is a private limited company used to hold investments, offering corporation tax rates on investment income and IHT planning through share gifting.
Dividends, interest, rental income received by the FIC
Amount withdrawn from FIC as dividends (0 = retained)
Frequently Asked Questions
What is a Family Investment Company (FIC)?
A FIC is a private limited company set up to hold family investments (shares, property, cash). Parents typically fund it via interest-free loans or preference shares, while children hold ordinary growth shares that increase in value without immediate IHT implications.
What are the main tax advantages of a FIC?
Investment income is taxed at corporation tax rates (19-25%) rather than higher/additional income tax rates (40-45%). Gains are taxed at 25% CT rather than 20-24% CGT. Income can be retained and distributed selectively over time to basic rate taxpayers.
How does a FIC help with IHT planning?
Ordinary shares gifted to children grow in value within their estate, not yours. Provided you survive 7 years after any gift, the value transferred is outside your estate for IHT. The FIC structure also allows gradual wealth transfer without immediate large gifts.
What are the downsides of a FIC?
Setup and annual running costs (accountancy, CT600 filing), loss of personal allowances and lower CGT rates, ATED if FIC holds residential property over £500k, and potential HMRC scrutiny of artificial arrangements.
Can a FIC invest in residential property?
Yes, but a FIC owning residential property over £500,000 may face the Annual Tax on Enveloped Dwellings (ATED), which adds significant annual costs. FICs are more tax-efficient for financial investments (shares, bonds) than property.
What is the optimal way to extract income from a FIC?
Typically via dividends (taxed at 8.75%/33.75%/39.35% depending on recipient's tax band), salary (deductible for CT), or loan repayments (the initial funding loan is repaid tax-free). Mixing extraction methods for different family members optimises the overall tax position.
Are loans to a FIC treated as loans to a director?
The initial funding is typically structured as a loan from parents to the FIC — repayable tax-free. This is different from a participator loan (s455 tax applies to loans from a close company to a shareholder). Proper documentation is essential.
When should I consult a specialist about a FIC?
A FIC involves company law, income tax, corporation tax, IHT, and potentially SDLT/CGT on asset transfer. Always take specialist tax and legal advice before setting one up, particularly regarding the articles of association and share structure.