Navigating FICs, IHT and CGT: Advanced Tax Planning for High-Net-Worth Families

As Inheritance Tax (IHT) rules evolve and Capital Gains Tax (CGT) remains a persistent consideration, high-net-worth families face increasing complexity in structuring their wealth. Family Investment Companies (FICs) continue to offer a compelling solution, but only when implemented with precision and foresight.

Recent changes have placed greater emphasis on lifetime gifting strategies. From April 2026, individuals can transfer up to £2.5 million of qualifying business interests without triggering an immediate IHT charge. While this creates planning opportunities, it also introduces new constraints.

A key consideration is that gifts must be genuine. If the donor retains benefits from the transferred assets, the intended tax advantages are lost. At the same time, families must distinguish between control and value.

It is entirely possible, and often desirable, for a founder to retain control of a company while transferring economic ownership to the next generation. This distinction is central to effective estate planning.

Leveraging Business Property Relief (BPR)

Business Property Relief can significantly reduce IHT exposure on qualifying assets. However, valuation plays a critical role.

When shares are gifted, the taxable value is based on the reduction in the donor’s estate, not simply the headline percentage transferred. Minority shareholdings often attract valuation discounts, which can make the effective value of a gift lower than expected.

For example, gifting a 20% stake in a private company may fall within allowable thresholds due to lack of control and marketability. Additionally, allowances such as the £325,000 nil rate band and the £2.5 million BPR limit, reset every seven years, enabling ongoing planning.

The CGT “Dry Tax Charge” Risk

While IHT often dominates discussions, CGT can present an immediate and unexpected challenge.

A critical point: gifting an asset is treated as a disposal for CGT purposes. This means a tax liability may arise even when no cash is received – a so-called “dry tax charge.”

In certain cases, holdover relief can defer this liability. This is typically available for gifts of shares in unquoted trading companies or transfers into specific structures, including FICs under share-for-share exchanges.

However, reliefs are nuanced and highly conditional. Missteps can result in significant tax exposure.

FICs as a Strategic Vehicle

FICs remain a powerful tool for integrating tax planning with investment strategy. They allow families to:

• Centralise investment management
• Facilitate controlled wealth transfer
• Optimise tax treatment across income and gains

But their effectiveness depends on careful structuring, particularly around share classes, ownership thresholds, and compliance with relief conditions.

Coordination is Critical

The interaction between IHT, CGT, and other taxes, such as Stamp Duty, is complex. Attempting to optimise one area in isolation can create unintended consequences in another.

For this reason, high-net-worth families benefit from a coordinated advisory approach bringing together investment, tax, and legal expertise under a single strategic framework.

The objective is not simply tax mitigation. It is the preservation of wealth, the smooth transition of assets across generations, and the maintenance of family control and legacy.

At Traditum, our specialist tax and legal teams work together to deliver clear, coordinated advice across IHT planning, CGT mitigation, and income structuring. Whether you are transferring private company shares, preparing for a sale, or establishing Family Investment Companies or trusts, we ensure every element is aligned.

We take a highly personalised approach to help structure, protect, and transition your wealth, providing the clarity and control you need for long-term continuity.