You’ve worked hard your whole life to build a £10 million property portfolio. Imagine handing over £4 million of that to HMRC, rather than passing it on to your children, just because you didn’t set things up correctly. It happens more often than you’d think. If your goal is to build real generational wealth, it’s absolutely critical to structure your assets the right way from the start.
Why Inheritance Tax Is a Real Threat
- Inheritance tax (IHT) in the UK can swallow up to 40% of your estate above the basic threshold.
- Large property portfolios are particularly at risk, simply owning properties in your own name or even a basic company can trigger massive tax bills on your death.
- This means millions that could have gone to your family might
end up going to the taxman instead.
The Solution: Family Investment Companies (FICs)
If you’re planning to build, or already have, a substantial investment portfolio, consider a Family Investment Company (FIC).
An FIC is a special limited company structure designed to keep control and wealth within your family, while minimising tax liabilities.
How Does It Work?
- You create a company and issue two different types of shares:
- Class A Shares: Held by you. These come with voting rights and dividend rights - so you control the company and can take income from it as you wish.
- Class B Shares: Issued to your children. These have no voting or dividend rights while you’re alive, but they do have future economic benefits. As the value of the company grows, so does the value of their shares.
- Transferring Wealth Gradually:
- Over time, you can move value from your Class A shares to your children’s Class B shares, slowly transferring the future value of your portfolio to the next generation, all while keeping control.
- Succession Planning:
- When you pass away, your Class A shares can be passed to your children, giving them control and dividend rights.