What a Family Investment Company Costs to Run, and Its Disadvantages

Quick answer: A Family Investment Company (FIC) is a company, so it needs a bank account, annual accounts, a corporation tax return, a confirmation statement and proper records of loans and dividends every year. Its main disadvantages are the second layer of tax when money comes out, 25% corporation tax on most income, public accounts, and no Business Relief. A FIC tends to be worth it only when the amount is large and you can leave it invested for a long time.

The annual duties of a FIC

A FIC is an ordinary private limited company, so it has the same duties as any other. None are hard. They do need to be done on time, every year, whether or not the company has had a busy year.

• Statutory accounts. The directors must prepare annual accounts and file them at Companies House. For a limited company, those accounts are public.
• Corporation tax return. The company files a company tax return (CT600) with HMRC. Corporation tax is normally due nine months and one day after the end of the accounting period.
• Confirmation statement. A yearly filing at Companies House that confirms the company's details, shareholders and people with significant control.
• Statutory books and records. A register of members, minutes and written resolutions.
• Decisions on loans and dividends. Directors should record why a dividend is paid, which share class it is paid on, and each repayment of a shareholder loan.
• Bank and investment accounts. These need to be kept in the company's name and not mixed with personal money.
• Shareholders' tax. Each shareholder who receives a dividend reports it on their own self assessment return if it is above the thresholds.

Directors owe duties to the company, even when everyone is family. That includes keeping proper records and acting within the articles.

What it costs

We do not quote a single figure here, because costs depend on what the FIC holds and who prepares the work. The cost headings are:

1. Set-up. Advice on whether a FIC fits, design of the share classes, articles of association, a shareholders' agreement, incorporation and funding documents.
2. Annual accounts and tax return. Normally prepared by an accountant. A FIC that holds a few funds is simpler than one with many properties, loans and share classes.
3. Investment costs. Platform, fund and adviser fees, which are paid whether you hold the assets personally or in a FIC.
4. Advice at review points. Gifts of shares, a change of share rights, a new family member or a change in the law.
5. Lender and legal costs if the FIC borrows or buys property.

Ask for these costs in writing before you start, and compare them with the tax you hope to save. A FIC is not a bargain if the annual costs eat the benefit.

The tax disadvantages

25% corporation tax on most income

A FIC that mainly holds investments is a close investment-holding company. For 2026/27 it pays corporation tax at 25% on its taxable profits, whatever their size, including interest, rent and gains. It does not get the 19% small profits rate, and it has no annual exempt amount for gains. Most dividends it receives from UK and overseas shares are exempt, which is why many FICs invest for dividends and growth rather than interest.

A second layer of tax on the way out

Money leaves a FIC in two main ways. A repayment of your loan is free of income tax, up to what you lent. Anything else normally comes out as a dividend, which the shareholder pays tax on: 10.75%, 35.75% or 39.35% above a £500 allowance in 2026/27. Taking it as a loan from the FIC to a shareholder is rarely a good idea, because a close company that lends to a participator pays a charge of 35.75% on loans made from 6 April 2026 if they are not repaid in time. The charge is repayable when the loan is cleared, but it ties up cash.

Example: A FIC earns £40,000 of interest in a year. Corporation tax at 25% is £10,000, leaving £30,000. If the shareholders then take £30,000 as dividends and pay tax at 35.75% on £29,500 (after a £500 allowance), their tax is about £10,546. The overall tax is about £20,546, or 51% of the interest. If the same interest had been invested personally by a higher-rate taxpayer, tax would be 40%, or £16,000, ignoring the personal savings allowance. So a FIC that pays everything out can cost more than holding the assets personally. The case improves when profit is left in the company to compound. Figures are hypothetical and simplified.

This is why the FIC works best for money you do not need to spend. Our Family Investment Company service page sets out the comparison.

CGT on getting assets in, and on gifts

Moving existing investments or property into a FIC is a disposal at market value for CGT, and a property transfer can bring SDLT. Gifting FIC shares is also a disposal at market value, and holdover relief is generally not available because a FIC is an investment company. Funding with new cash avoids the first problem. Issuing growth shares at the start avoids the second.

No Business Relief

A company that mainly holds investments or lets property does not qualify for Business Relief. A FIC is not an answer for families whose main asset is a trading business that already qualifies. Our article on FICs and the April 2026 Business Relief changes explains where the two meet.

Your loan stays in your estate

If you fund the FIC with a loan, the unpaid balance remains in your estate for inheritance tax. The benefit is in the growth that sits in shares held by other people, not in the money you lent. See our article on funding a Family Investment Company with a loan.

The non-tax disadvantages

• Public accounts. Anyone can see the FIC's balance sheet at Companies House, and the identity of its shareholders. A trust is more private.
• Less flexibility than a trust. Shares, once given, belong to the shareholder. A trust can keep control with trustees for longer.
• Seven-year wait. A gift of shares only leaves your estate for IHT if you survive seven years, subject to taper relief for part of the tax.
• Family conflict. Once children own shares, they have rights. Good articles and a shareholders' agreement matter, and a FIC cannot guarantee protection on divorce.
• Hard to unwind. Taking everything out of a FIC at once can mean dividends taxed at 39.35%, or liquidation costs.

Our article on trusts versus Family Investment Companies compares the flexibility trade-off.

When a FIC is not worth it

We are generally cautious when:

• the amount to invest is modest;
• you may need the capital back;
• the assets are your home or a trading business that already qualifies for Business Relief;
• the family wants to spend the income each year; or
• you want to avoid public accounts.

In those cases, simpler tools such as pensions, ISAs, lifetime gifts, a trust or a will may do more. Our article on FIC tax planning strategies covers when a FIC adds value.

Talk to us about Family Investment Company

• A FIC is one tool, not a plan: it works best alongside gifts, trusts and a will
• It mainly caps your share of future growth rather than removing existing wealth from your estate
• A FIC that holds investments pays corporation tax at 25%, but most dividends it receives are exempt

See how we help or book a free 20-minute call.

FAQs

How much does a Family Investment Company cost to run each year?

There is no fixed figure. Costs include annual accounts, a corporation tax return, a confirmation statement and any advice at review points, plus investment fees. They rise with complexity, such as property, loans and several share classes. Ask for a written estimate before you set up.

What are the main disadvantages of a Family Investment Company?

The second layer of tax when profit is paid out as dividends, 25% corporation tax on most income, public accounts, no Business Relief, tax on moving assets in and on gifts of shares, and the need to survive seven years for gifts to leave your estate. A FIC is also hard to undo cheaply.

Do I have to file accounts for a FIC?

Yes. A limited company files annual accounts and a confirmation statement at Companies House, and a company tax return with HMRC. The accounts are public. You should also keep records of dividends, loans and board decisions.

Can I take money out of a FIC without paying tax?

You can take back the loan you made, free of income tax, up to the amount you lent. Dividends are taxable on the person who receives them, and loans from the company to shareholders can trigger a 35.75% charge on the company if left outstanding.

Is a Family Investment Company worth it for a small amount?

Usually not. The annual duties and costs are largely fixed, so they weigh more on a small FIC. We would normally want to see a sum you can leave invested for many years. We will tell you if simpler options fit better.

Sources

• Corporation tax rates: https://www.gov.uk/corporation-tax-rates
• Dividend tax and allowance: https://www.gov.uk/tax-on-dividends
• Loans to participators of a close company (CTA 2010 section 455): https://www.legislation.gov.uk/ukpga/2010/4/section/455
• Running a limited company: https://www.gov.uk/running-a-limited-company
• Prepare and file annual accounts for a limited company: https://www.gov.uk/prepare-file-annual-accounts-for-limited-company
• Pay Corporation Tax: https://www.gov.uk/pay-corporation-tax
• Capital gains tax rates: https://www.gov.uk/capital-gains-tax/rates
• Gifts and the seven-year rule: https://www.gov.uk/inheritance-tax/gifts
• Business Relief exclusion for investment businesses (IHTA 1984 section 105): https://www.legislation.gov.uk/ukpga/1984/51/section/105

Next step

If you are weighing the costs against the benefit, we will go through your numbers and tell you honestly whether a FIC earns its keep. We offer a free 20-minute call to start. Book a call.