Family Investment Companies vs Trusts – Which Solution Is Right For You?

A family investment company and a trust both move wealth to the next generation, but the £2.5 million agricultural and business property relief allowance that took effect on 6th April 2026 changed the comparison for farming and business families. A trust settled before 30th October 2024 keeps unlimited relief until its first ten-year anniversary charge on or after 6th April 2026, after which the new allowance applies. Choosing between the two structures now depends on how much qualifying property a family holds and when any existing trust was settled.

Summary

A trust transfers assets to trustees for named beneficiaries, while a family investment company holds family wealth inside a private limited company controlled by its directors.
The £2.5 million agricultural and business property relief allowance, in force for deaths on or after 6th April 2026, now shapes the tax comparison between the two structures for farming and business families.
Trusts settled before 30th October 2024 keep unlimited 100% relief until their first ten-year anniversary charge on or after 6th April 2026, when the new allowance applies.
Business Asset Disposal Relief rises to 18% from 6th April 2026, affecting anyone who funds a family investment company by disposing of qualifying business assets or shares.
The right structure depends on the value of the assets involved, whether they qualify for agricultural or business property relief, and how much control the family wants to retain.

Introduction

If you want to pass wealth to your children or grandchildren but are unsure whether a trust or a family investment company is the right vehicle, the choice can feel finely balanced and hard to reverse. A solicitor who advises on wills, estates, and trusts can compare the two structures against your assets, your family, and your tax position, and set out the consequences of each before you commit.

Both structures aim to move wealth down the generations while keeping some control with the person who created the arrangement, yet they reach that goal through very different legal and tax routes. The comparison has shifted since the Finance Act 2026 reformed agricultural property relief and business property relief. Families holding farmland, farm buildings, or qualifying trading business assets now need to weigh the £2.5 million relief allowance against the flexibility a family investment company offers, rather than relying on older assumptions about unlimited trust relief.

This forms part of our wider guide to wills, estates and trusts.

What is the difference between trusts and FICs?

A trust is a legal arrangement where a settlor transfers assets to trustees, who manage them for named beneficiaries, while a family investment company is a private limited company that holds a family’s investments on behalf of its shareholders. Parents or grandparents typically fund a family investment company by making a loan or subscribing for shares, then gifting shares to children or grandchildren so they receive future benefit from the company’s growth.

Trustees owe duties directly to beneficiaries, while a family investment company is governed by its Articles of Association and any Shareholders’ Agreement, giving founders scope to keep voting control while passing economic value to younger family members. Gifts into most trusts above the nil-rate band trigger an immediate lifetime charge, whereas funding a family investment company by loan does not reduce the founder’s estate at the point of funding.

How does the £2.5m cap apply here?

The £2.5 million agricultural and business property relief allowance, transferable between spouses and civil partners, applies to the combined value of qualifying agricultural and business property in an estate for deaths on or after 6th April 2026, with 50% relief above that figure. Families whose land or trading business exceeds that allowance face an effective 20% inheritance tax charge on the excess.

Under the Inheritance Tax Act 1984, as amended by the Finance Act 2026, qualifying property held personally or in a trust can claim the relief directly, but a family investment company itself does not qualify for agricultural or business property relief unless it is a trading company whose shares separately meet the conditions for business relief. As the Chancellor stated when the allowance was revised, in the gov.uk announcement of the change: “We are increasing the individual threshold from £1m to £2.5m which means couples with estates of up to £5m will now pay no inheritance tax on their estates.” That relief attaches to qualifying land and business assets directly, not to a family investment company holding them.

What are the transitional trust rules?

A trust settled before 30th October 2024 keeps its unlimited 100% agricultural and business property relief until the first ten-year anniversary charge falling on or after 6th April 2026, at which point the £2.5 million trust allowance begins to apply. Property added to a trust on or after 30th October 2024 falls under the new allowance mechanism from the date it was added, regardless of when the trust itself was set up.

This transitional treatment gives existing trusts a longer runway than a new structure set up from scratch. A family considering a new trust or a family investment company after 6th April 2026 cannot rely on an older trust’s transitional protection, so the £2.5 million allowance applies to newly settled property immediately.

How does BADR affect funding an FIC?

Business Asset Disposal Relief rises to 18% on disposals from 6th April 2026, up from 14% between 6th April 2025 and 5th April 2026, according to HM Revenue and Customs guidance on Business Asset Disposal Relief. Anyone who sells qualifying business assets or shares to raise cash for a family investment company faces this higher rate on gains realised on or after that date.

The relief only applies to disposals meeting the qualifying conditions on gov.uk, such as minimum shareholding and employment tests, so a family investment company itself, holding investments rather than trading assets, will not usually generate gains eligible for the relief on its own share disposals.

How do the two structures compare overall?

Attribute	Trust	Family investment company
Control	Trustees hold legal control; settlor may retain influence through a letter of wishes or reserved powers	Founders keep control through voting shares and their role as directors
Tax treatment on transfer	Gifts above the nil-rate band trigger an immediate lifetime charge at 20%	Funding by loan creates no immediate charge; gifted shares become a potentially exempt transfer
APR and BPR interaction	Qualifying agricultural or business property held in the trust can claim relief directly, subject to the £2.5 million allowance from 6th April 2026	The company itself does not attract APR or BPR unless its own shares independently qualify as business property
Running cost	Registration with HMRC’s Trust Registration Service; periodic ten-year anniversary charges apply	Incorporation, annual accounts, and confirmation statement filed at Companies House; ongoing corporation tax compliance

Families with modest qualifying assets, or beneficiaries not yet born, tend to find a trust more straightforward. Families with significant capital and assets outside agricultural or business property relief tend to find a family investment company more tax-efficient.

Frequently asked questions

Can a family investment company hold farmland and still get APR?

No, a family investment company does not itself qualify for agricultural property relief simply by holding farmland, because the relief attaches to the land and the way it is farmed, not to the corporate vehicle. Families with agricultural land should take advice before transferring it into an FIC, since the transfer can forfeit relief the land would keep if held personally or in a qualifying trust.

Does the £2.5 million allowance apply to money already in a trust?

The answer depends on when the trust was settled. Trusts settled before 30th October 2024 keep unlimited 100% relief until their first ten-year anniversary charge on or after 6th April 2026, while property added on or after 30th October 2024 falls under the £2.5 million allowance mechanism from that date.

Is an FIC always cheaper to run than a trust?

No, a family investment company usually costs more to set up and run than a trust because it requires incorporation, annual accounts, and filings at Companies House, alongside corporation tax compliance. A trust carries lighter ongoing administration but is subject to periodic ten-year anniversary charges once assets exceed the available relief.

About the author

Mathew Jones, Legal Director, Cocks Lloyd Solicitors. SRA number 275785.

Mathew Jones is Legal Director and Head of the Private Client Department at Cocks Lloyd Solicitors, specialising in wills, trusts, and complex estate administration. With over 20 years of experience, including 15 years advising on agricultural holdings and family businesses, he helps clients choose between trust and company structures as reliefs change.

Talk to Cocks Lloyd

Speak to our private client team about whether a trust or a family investment company suits your family’s farm, business, or investment portfolio under the reformed reliefs. Contact our estate planning solicitors to arrange an appointment.