Our article shows you how to secure your family assets in a tax-efficient way.
We will cover:
- The benefits of setting up a Family Investment Company
- Changes to tax treatment of this type of company
What is a Family Investment Company?
- A Family Investment Company (FIC) is a private company whose shareholders are family members.
- In this type of company, parents can retain control over assets whilst planning for future succession and accumulating wealth in a tax-efficient manner.
- The founder is also usually the director, and the shareholders, whilst not deciding on investments or dividends, will benefit financially.
Why use a Family Investment Company?
- This type of company provides tax-efficient growth or asset protection.
- The structure is flexible and can be tailored to meet your individual circumstances.
- As a founder and director, you’ll have full control of your investments.
- It’s also a valuable option in terms of tax.
What is the tax treatment of a Family Investment Company?
- Any profits from your investments will be subject to the lower rates of Corporation Tax (19%), rather than Income Tax.
- You won’t be subject to Inheritance Tax as your assets within an FIC won’t fall as part of your estate.
You need to take care due to the forthcoming increase in Corporation Tax rates which apply from April 2023. The main rate will increase to 25%.
From 1 April 2023:
- The main rate of Corporation Tax will increase from 19% to 25%.
- The small company rate (19%) will apply to single companies with annual profits of less than £50,000.
- Marginal relief will be given for companies with profits between £50,000 (lower limit) and £250,000 (upper limit).
- Companies whose profits fall within these limits will be able to benefit from marginal relief, paying between 19% and 25%.
From 6 April 2022
- Dividend tax rates increased by an extra 1.25% in Finance Act 2022.
- Rates increased to: Basic rate 8.75% (2021-22 7.5%), Higher rate 33.75% (2021-22 32.5%) and Additional rate 39.35% (2021-22 38.1%).
- The s.455 rate for the Corporation Tax charge for unpaid loans to participators also increase from April 2022, from 32.5% to 33.75%.
Due to the many tax and non-tax benefits of setting a Family Investment Company listed in this article, it remains a viable option to secure your family fortune.
Make sure you plan wisely by speaking to a specialist before you make any decisions.
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Kind regards Ilyas