The Autumn Budget, delivered on 26 November 2025, signalled a shift towards taxing wealth and investments rather than earned income - headline rates of income tax and National Insurance remain unchanged and instead, the focus was on raising taxes on non-employment income (by 2% for dividend income from 6 April 2026 and by 2% for property and savings income from 6 April 2027). While the Budget didn't explicitly reference Family Investment Companies (FICs), the Budget’s changes, particularly higher taxes on dividends and savings, frozen IHT thresholds and the maintained rate of corporation tax, will help to enhance the existing benefits of using FICs as an estate succession tool, in the right circumstances. The changes might focus the attention of some individuals who hadn’t previously considered these corporate structures as part of their planning.
The corporation tax advantage
The rates of corporation tax remain unchanged in the Budget which means FICs benefit from the maintained 25% corporation tax rate. While value extracted from FICs will generate a tax charge along standard principles (and dividends in the hands of the shareholders will suffer the extra 2% on dividend rates), the FIC itself can be an efficient vehicle for growing wealth in the meantime. While assets are maintained in the corporate environment, a FIC has 75p in every pound to reinvest (whereas an individual would only have 58p (higher rate) or 53p (additional rate) by 6 April 2027). A further maintained benefit is that dividends received by the FIC aren't subject to corporation tax. Therefore, in some circumstances, holding assets in a FIC rather than personally can be very attractive.
Frozen allowances and thresholds
Given the frozen personal allowances and thresholds until 2031 announced in the Budget, the ability to gift value while maintaining a guiding hand is likely to further incentivise the use of FICs. Parents worried about the frozen inheritance tax threshold may wish to pass wealth to children earlier by creating a FIC and gifting shares so that any future growth in value occurs outside of their estate. Aside from the favourable corporate tax treatment mentioned above, one of the significant benefits is that FICs enable control over how and when profits are distributed to shareholders. The control exercised by directors allows a protective and controlled flow of benefit, which has many advantages, one of which might be the ability to manage personal tax liabilities. Remember, the FIC can be set up so that the ordinary shares are split into separate ‘alphabet’ classes, with each shareholder holding their own class. This enables the directors to declare dividends at different times and at different rates for each share class, allowing them to manage the income tax liability for shareholders who have different income levels or personal circumstances. The bottom line is that the frozen thresholds don’t change the FIC rules, but they do highlight some of the advantages of corporate ownership and increase the urgency of succession planning - boosting the appeal of FICs as a long-term solution.
Restrictions on other options
At a basic level, the tax efficient personal option of using ISAs to save will continue to have a place in planning. While overall ISA limits are maintained, the allowable cash contribution is dropping from £20,000 to £12,000 from April 2027 for under 65s (those over 65 are exempt from the cash ISA reduction) which makes this option less flexible for some.
Likewise, from April 2029, National Insurance savings on salary sacrifice pensions will be capped at £2,000 per year. High earners who therefore previously used salary sacrifice to ‘save’ significant sums may look for alternative structures to provide efficiently for themselves and their family.
Trusts continue to play a key part in private client succession planning in England & Wales due to their flexible and protective structuring, but they are subject to strict limits of how much can be settled without incurring an immediate inheritance tax charge.
It remains very valuable that there is no contribution limit when planning with FICs.
Points to note
Importantly, whilst FICs can offer a number of benefits, there is no standard approach to estate planning, and individuals and families will need to tailor their plans to suit their personal circumstances. There is no one solution that fits every family and, in many circumstances, FICs can usefully be combined with trusts, wider lifetime gifting, and diversified investment strategies to maximise protection and efficiency. FICs themselves can be structured in a variety of different ways and it is key to ensure that they comply with the letter and spirit of the law to provide a measured and safe environment for wealth.
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