Secure the Future of Your Family Business

A flexible and tax-efficient structure for succession planning is now more important than ever, enabling you to retain control while passing value to the next generation.

New Tax Issues for Succession Planning

Passing on family wealth and business to the next generation is a cornerstone of many family legacies. But with ever-changing tax rules and rising financial pressures, preserving what you’ve built has never been more challenging. For family business owners in the UK, recent changes to Inheritance Tax (IHT) bring this challenge into sharper focus.

A simple and effective solution to retain control while safeguarding value for future generations is a Family Investment Company (FIC). Flexible, tax-efficient, and increasingly popular, FICs offer a modern approach to securing wealth and legacy.

What’s Changing in UK Inheritance Tax?

Following the latest budget, if you leave your business to your children, they could have to sell it to pay the Inheritance Tax bill. Talking to clients about their IHT has always been a difficult conversation but the stakes make this conversation more important than ever.

Consider a business valued at £10 million. Under the latest budget, only £1 million is exempt, leaving £9 million subject to 50% relief. This results in an IHT liability of £1.8 million – a steep price to inherit any family business.

How an FIC Could Save Your Business

A Family Investment Company is more than just a tax tool; it’s a wealth preservation strategy. Established as a private company, an FIC is tailored to fit the needs of the family. Through customised share structures, senior members can retain decision-making power with voting shares, while growth shares are allocated to the next generation, allowing wealth to grow outside the taxable estate for IHT purposes.

FICs can protect family assets such as surplus cash or investments from IHT. But that’s not all: trading company shares in the family business can be held by the FIC. This arrangement retains control whilst ensuring that the growth in value of the family business is shielded from IHT.

While discretionary trusts have been a go-to option for wealth management, they come with limitations (in comparison with FICs) such as periodic tax charges, higher tax rates on income and gains, and less flexibility. The adaptability of FICs makes them a modern and compelling alternative to traditional trusts.

Take Action Now

The recent UK budget changes serve as a call-to-action for family business owners.

Protecting your legacy requires proactive planning and innovative strategies. By incorporating an FIC into your succession plan, you can navigate the challenges of IHT, safeguard your wealth, and secure your business for generations to come.