Latest Posts

No such thing as a quick FIC(s): the long term view of a Family Investment Company

A recent Telegraph article referred to Family Investments Companies (FICs) as a ‘little-known alternative to trusts’ that could reportedly help people ‘dodge’ inheritance tax. Contrary to this belief, FICs are not so ‘little-known’ amongst its key audiences, having grown significantly in popularity over recent years as a flexible and potentially tax-efficient vehicle for holding and growing family wealth.

Once a niche structure used by only the wealthiest families, demand for FICs has been on the rise since 2006, and as an alternative to the once all-powerful trust structure. However, more so than for its ‘tax-dodging’ profile, the benefits regarding wealth preservation and intergenerational transfer are far more crucial factors behind a FIC’s increasing appeal.

What is a Family Investment Company?

Not defined in statute, in simple terms a FIC is a private limited company owned and controlled by members of the same family, primarily to hold and manage family investments, with an appropriate governance structure built in. There are, of course, family trading companies but these are not the focus of this article.

A key feature of a FIC is often its flexible share structure. In addition to ordinary shares, a FIC typically issues multiple classes of shares, allocated to different family members across different generations. These might include:

• Ordinary shares, carrying full voting rights and economic participation;
• Growth shares, designed to capture future appreciation in the value of the company;
• Freezer shares, which fix the current value of the founder’s interest, allowing future growth to accrue to younger family members; and
• Redeemable or exclusive shares, tailored to specific family arrangements.

A FIC share structure can therefore allow value and control to be separated. Senior family members — typically the founders or parents — can retain voting control and access to income through their share class, whilst transferring economic growth to children or grandchildren through a different class of shares.

How is a Family Investment Company taxed?

The taxation of a FIC needs to be considered across four stages:

• Creation: Funding a FIC with cash is generally the most straightforward approach from a tax perspective. Transferring assets into the company can trigger capital gains tax (CGT) if the asset has appreciated in value, and stamp duty land tax (SDLT) where real estate is involved. Inheritance tax implications may arise depending on how the shares are structured and who holds them, and professional advice is essential at the outset.

• Lifetime Taxation: Once established, the FIC pays corporation tax on its income and gains. Following the increase in rates of corporation tax, FICs no longer enjoy as large a tax differential over personal rates as they once did. However, for investment income — particularly dividends received from other UK companies — the corporate inter-company dividend exemption can make a FIC highly efficient, as such dividends are generally received free of further corporation tax. Capital gains within the FIC are taxed at the corporation tax rate. Investment income and gains that are retained and reinvested within the FIC benefit from compound growth at the lower post-tax retained rate compared with investments held personally.

• Extraction of Value: How value is extracted from a FIC affects the overall tax efficiency of the structure:
  • Dividends: subject to dividend income tax in the hands of the recipient shareholders (assuming they are UK resident);
  • Salary: where family members work for the FIC, a salary can be paid and will be deductible against the company’s profits, though it will be subject to income tax and National Insurance in the usual way;
  • Loan repayment: where the FIC was funded by a shareholder loan, repayment of that loan is not an income event and can be a tax-efficient means of extracting the original capital;
  • Capital distributions on winding up: generally subject to CGT, with the benefit of any available reliefs.

• Winding Up: On a winding up, distributions to shareholders are generally treated as capital receipts, potentially attracting CGT. Planning the eventual exit from the structure — including consideration of Business Asset Disposal Relief and holdover relief, where available — is an important part of the overall strategy.

Family Investment Companies and Succession Planning

Some of the most compelling characteristics of a FIC as a succession planning tool center on its versatile nature:

• Gradual wealth transfer without loss of control. By issuing growth shares to children or grandchildren at the outset, the FIC allows future value to accrue to the younger generation from day one, without the founders relinquishing their voting rights or access to income.

• Inheritance tax planning. The value that accumulates in the FIC in the hands of younger family members is outside the founding generation’s estate, and careful structuring can reduce or manage the IHT exposure of those shares over time.

• Family governance. A FIC brings generations together as shareholders and directors, creating a shared stake in the management and growth of family wealth from an early stage. Alongside the articles of association and shareholders’ agreement, a family charter can be drawn up to set out the family’s values, investment philosophy, and governance arrangements — providing a framework for decision-making extending beyond the purely legal and financial.

• Flexibility over time. A FIC can evolve as the family’s circumstances change – share classes can be redesigned, new family members can be introduced, and the investment strategy can be adapted — all within the corporate framework. It is also possible to convert an existing family company into a FIC where the family holds other businesses.

Conclusion

A FIC can be a powerful vehicle for managing, growing, and transferring family wealth across generations. Its ability to separate economic value from control, combined with the flexibility of its share structure and its suitability as a governance framework, makes it a compelling alternative to traditional trust-based planning.

However — as the title of this article suggests — a FIC is not a quick ‘fix’ for those seeking to mitigate their tax exposure. Establishing and maintaining one requires careful professional advice at every stage, from the initial structuring and funding, through the ongoing tax compliance obligations, to the eventual exit strategy.

This article is for general information purposes only and does not constitute legal or tax advice. Specific advice should be obtained in relation to your individual circumstances.

Read More

Inheritance Tax on Pensions from April 2027: HMRC Explains How the New Regime Will Work

Pensions have historically occupied a different place in estate planning from property, investments and other assets. That is about to change.

From 6 April 2027, most unused pension funds and pension death benefits will be brought within an individual’s estate for Inheritance Tax purposes. For people who have deliberately preserved pension wealth with the intention of passing it to the next generation, the assumptions underpinning that strategy may now need to be revisited.

The change itself has been known for some time, but we have been waiting for more clarity on how the new system will operate in practice when somebody dies.

HMRC’s Technical Note 2: Further information on Inheritance Tax and Pensions, published on 27 August 2026, provides important further detail following a recent update to the applicable regulations. It explains the information that will need to pass between personal representatives and pension schemes, how pension benefits can be temporarily withheld, how Inheritance Tax may be paid directly from pension funds and how personal representatives can ultimately obtain clearance from HMRC.

For families with significant pension wealth, it is an appropriate time to consider what the change means for their wider estate and succession planning.

At a glance: the April 2027 pension Inheritance Tax changes

When do the rules change?	For deaths on or after 6 April 2027
What is changing?	Most unused pension funds and pension death benefits will be brought into the deceased’s estate for IHT purposes.
Will every pension be affected?	No. Certain benefits, including death-in-service benefits from registered pension schemes and some dependant’s scheme pensions, remain outside the new regime.
Who will deal with the Inheritance Tax position?	Personal representatives will need to obtain information from pension schemes and factor pension wealth into the estate’s wider Inheritance Tax position.
What should individuals do now?	Review pension arrangements alongside Wills, other assets and wider succession planning before the new rules take effect.

What is changing to Inheritance Tax on pensions from April 2027?

For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be treated as part of the deceased’s estate for Inheritance Tax purposes.

This represents a significant departure from the current treatment of many discretionary pension schemes, under which unused pension funds can generally sit outside the member’s estate for Inheritance Tax purposes.

Not every pension benefit will be brought within the new regime. Certain benefits will remain outside its scope, including death-in-service benefits payable from registered pension schemes and certain dependant’s scheme pensions.

The change does not mean that every pension will suffer Inheritance Tax. Pension wealth will instead form part of the wider calculation of the deceased’s estate, with the availability of exemptions, reliefs and nil-rate bands (NRBs) determining the ultimate tax position.

The standard Inheritance Tax nil-rate band is currently £325,000. A residence NRB of up to £175,000 may also be available where the relevant conditions are satisfied, although this begins to taper for estates worth more than £2 million.

Who will be affected by the new pension Inheritance Tax rules?

The changes are particularly relevant to individuals who have accumulated substantial pension wealth.

However, in some cases the impact may go beyond simply Inheritance Tax on the pension itself.  Individuals whose estate is approaching the £2 million residence NRB taper threshold may also need to consider whether bringing pension wealth into the estate changes the availability of that allowance.

For example, take a married couple with assets in their estate (including their home) worth £2 million, and a pension of £1 million.  If they leave everything to one another, and to their children on the second death, they would before the change have an Inheritance Tax liability of £400,000.  However, once the pension is taken into account, they will have lost the residence NRB, and so the total Inheritance Tax liability will be £940,000 – an increase of £540,000.

How will pensions be valued and reported after death?

One of the biggest practical challenges created by the new regime is that pension assets and the rest of an estate will need to be considered together.

Personal representatives will need information about the deceased’s pension arrangements to establish the value of the estate and determine whether an Inheritance Tax account is required, and if so how much to report. They will also need to know who will benefit, in order to determine what exemptions might be available.

HMRC’s latest technical note sets out formal information-sharing requirements between personal representatives and pension scheme administrators.

Broadly, personal representatives will be able to request information including the value of what the legislation refers to as the deceased’s “notional pension property”. Pension schemes will generally have 28 days from receiving a valid request to provide the required information available to them.  In a helpful change to the previous position, the latest regulations mean that a prospective personal representative (e.g. someone entitled to administer the estate on intestacy) is also entitled to request information.

However, if the pension scheme has not yet determined who will benefit from the pension, they are not required to report this until 14 days after the determination has been made. There is no specific deadline for the pension scheme to make this decision, which may delay the personal representatives being able to make an accurate Inheritance return.

The prompt identification of all of the deceased’s pension arrangements is therefore likely to become an increasingly important part of estate administration. Delays in identifying schemes, obtaining valuations or establishing beneficiaries could have knock-on consequences for the Inheritance Tax process.

Can Inheritance Tax be paid directly from a pension?

The new regime provides a mechanism known as the Pensions Direct Payment Scheme.

A valid payment notice can require a pension scheme administrator to pay Inheritance Tax, together with applicable interest, directly to HMRC from the relevant pension benefits.

Payment notices can be issued by personal representatives, someone acting on their behalf or pension beneficiaries. A beneficiary can only issue a notice in relation to their own Inheritance Tax liability and from pension benefits payable to them under that scheme.  A prospective personal representative (for example, on an intestacy), while entitled to request information, is not entitled to issue a payment notice.

Once a valid payment notice has been received, the pension scheme administrator generally has 35 days to make the payment.

Where there is reason to believe that Inheritance Tax is or may be payable, a personal representative, prospective personal representative or someone acting on their behalf can issue a notice requiring the pension scheme administrator to withhold payments.

Broadly, the scheme can be required to withhold up to 50% of the relevant pension death benefit entitlement for up to 15 months after the end of the month in which the member died. However, withholding will not apply to excluded benefits or benefits passing to exempt beneficiaries. For example, where a surviving spouse or civil partner qualifies as an exempt beneficiary, their share should not be subject to withholding.

What happens if a pension is discovered after the estate has been administered?

Personal representatives can seek formal clearance from HMRC once the administration has reached an appropriate stage. Where clearance has been obtained, they may be discharged from personal liability for Inheritance Tax relating to pension benefits that are only discovered subsequently.

Personal representatives should only apply once the Inheritance Tax account and relevant schedules have been submitted, they believe all Inheritance Tax has been paid and estate values are considered final.

Where a previously unknown pension subsequently emerges after clearance, the pension beneficiary may instead become liable for the additional Inheritance Tax, although the personal representatives will still have reporting responsibilities.

Why the changes could alter existing estate-planning strategies

For many individuals, the existing tax treatment has encouraged a strategy of using other assets during retirement while preserving pension wealth for beneficiaries.

That strategy should not automatically be abandoned, but the assumption that preserving a pension until death will necessarily be the most tax-efficient succession strategy will need to be revisited.

For some individuals, the reforms may change the order in which different assets are used during retirement. For others, they may place greater emphasis on lifetime gifting or on how pension nominations interact with the wider estate plan.

Any planning needs to take into account the potential income tax consequences of receiving pension benefits, both for the pension holder themselves, if making withdrawals during their lifetime, as well as for beneficiaries where pension benefits are inherited.  If potential beneficiaries are likely to pay different marginal rates of income tax, this might be something to take into account in deciding how to allocate different parts of an inheritance.

What should you do before April 2027?

There are still several months before the new rules take effect. For those likely to be affected, that provides a useful opportunity to review existing arrangements rather than waiting until April 2027.

1. Establish the value of your wider estate

Start by building an up-to-date picture of your overall position, including pension values, property, investments and other assets.

The significance of the pension changes cannot be assessed properly without understanding how the pension sits within the estate as a whole.

2. Review pension nominations alongside your Will

A pension nomination may remain important in determining who receives pension benefits, but the tax consequences of that decision may look different under the new regime.

Pension nominations should therefore be considered alongside the Will and wider succession plan rather than in isolation.

3. Model the potential Inheritance Tax position

For larger estates, comparing the expected Inheritance Tax position before and after 6 April 2027 can help identify how much additional exposure the reforms may create.

This may be particularly important where the estate is close to the £2 million residence nil-rate band taper threshold.

4. Assemble clear records

It will be important for your personal representatives to be able to promptly identify your pensions following death, in order to make contact with the relevant pension schemes.  You can make this easier for them, and avoid the risk of pensions being overlooked, by ensuring that you have clear and up-to-date records available, in a format that will be accessible to them at the relevant time.

5. Avoid making pension withdrawals solely because of the Inheritance Tax changes

Taking money out of a pension can trigger Income Tax and may simply replace an asset within the pension with cash or investments that sit directly within the individual’s estate.

There is therefore no universal answer to whether someone should draw down pension wealth before April 2027. The appropriate strategy will depend on the individual’s circumstances.

How Quastels can help

The inclusion of pensions within the Inheritance Tax regime represents a significant change to the way many families will need to think about succession planning.

Our Private Wealth & Tax team can advise individuals and families on how the April 2027 pension reforms interact with their existing estate planning and can work together with your financial advisors to provide joined-up advice.

Reviewing the position before the new rules take effect can provide time to understand the potential exposure, model different outcomes and consider whether existing arrangements remain appropriate.

Read More

When Should You Update Your Will? Key Life Events That Should Trigger a Review

Ensuring that your Will reflects your current wishes is of fundamental importance to you and your loved ones.

However carefully your Will has been drafted, it cannot account for every possible future change in your family circumstances, finances, residence or the law. As a general rule, it is sensible to review your Will every five years, or sooner if a significant personal, financial or legal change occurs.

Below, we have set out some of the key triggers that should prompt you to review your Will.

Does marriage or civil partnership affect your Will?

A marriage or civil partnership can affect the validity of your existing Will and may change how you want your estate to be distributed on death.

In England and Wales, getting married or entering into a civil partnership will usually cancel any Will made before that marriage or civil partnership, unless the Will was prepared in contemplation of it. Marriage and civil partnership can also unlock important inheritance tax exemptions, which may affect your wider estate planning.

Updating your Will at this stage helps ensure that your estate is passed on in accordance with your current wishes and that your estate planning reflects your new legal and family position.

Should you update your Will after divorce?

A divorce can also affect parts of your Will if your former spouse or civil partner is named as an executor or beneficiary. These provisions relating to a former spouse or civil partner may no longer take effect in the way they did before. This can leave uncertainty, particularly where they were appointed as an executor or where you and your former spouse prepared mirror Wills reflecting each other’s wishes.

Reviewing your Will following divorce helps ensure that your estate is still passed to your chosen beneficiaries and avoids complications in the administration of your estate.

Should you update your Will after having children or grandchildren?

Welcoming a child into your family is also a good time to review your Will.

This is particularly important if you wish to appoint guardians for your children or provide for minor beneficiaries under a trust structure.

If your existing Will was created before the next generation of your family arrived, you may want to reconsider how your estate will be passed down, who should be responsible for administering it, and whether any inheritance should be protected until children or grandchildren reach a suitable age.

This may be especially important for blended families or following second marriages.

Should you update your Will after a significant financial event?

Moving house, buying additional property, starting or selling a business, receiving an inheritance or experiencing a significant change in asset values can all affect the value or structure of your estate.

These events may affect how you choose to structure your Will, your chosen beneficiaries and any estate planning opportunities available to you.

For example, a business sale, property acquisition or inheritance may change the balance of your estate considerably. A Will that was appropriate when it was signed may no longer reflect how your wealth is now held or how you would want it to be passed on.

What happens if a beneficiary or executor dies?

If a beneficiary or executor dies, your Will may no longer work as you had intended when it was drafted.

You may need to replace these appointments to ensure that your estate is administered as efficiently as possible and that your chosen beneficiaries are still properly provided for.

This is particularly important where an executor had a specific role because of their relationship with the family, knowledge of the estate or professional expertise.

Should you update your Will if you move abroad or acquire overseas assets?

Moving country, acquiring or giving up citizenship in the UK or abroad, or owning assets in other jurisdictions can raise succession and tax issues both at home and overseas.

Where international considerations apply, it is sensible to review your Will to ensure it works alongside domestic and international laws, tax rules and any overseas estate planning documents.

This may be particularly relevant for internationally mobile families, individuals with overseas property or assets, family members in different countries or cross-border business interests.

Can changes in the law affect your Will?

Significant changes in the law can also affect your existing Will and any tax planning you may have in place.

For example, recent changes replacing domicile with long-term residence as the determining factor for the scope of UK inheritance tax may affect families with cross-border connections. A Will that was tax-efficient when signed may not remain so after significant legal or tax changes.

This is why it is important to review your Will not only when your personal circumstances change, but also when the legal or tax landscape changes.

What should you consider when reviewing your Will?

When reviewing your Will, it is helpful to consider whether it still reflects:

• who you want to benefit from your estate;
• who should act as your executors;
• who should act as guardians for minor children;
• whether any beneficiaries should inherit outright or through a trust;
• whether your estate has changed significantly in value or structure;
• whether you own assets overseas;
• whether your inheritance tax planning remains appropriate;
• whether there are any family circumstances that may create uncertainty or future dispute.

A regular review of your Will gives you peace of mind that it remains practical, tax-efficient and aligned with your wishes.

How Quastels can help

Quastels’ Private Wealth & Tax team advises individuals, families, trustees, executors and internationally mobile clients on Wills, succession planning, inheritance tax, trusts, probate and cross-border estate planning.

If any of these events apply to you now or in the future, we would be happy to arrange a call to discuss your circumstances and review whether your existing Will continues to reflect your wishes.

Read More