With rising tax pressure, frozen Inheritance Tax thresholds and increasing business and property values, business succession planning and wealth protection have become critical issues for family business owners and investors in the UK.

In 2026, many entrepreneurs are realising that a lack of succession planning can result in significant tax exposure, cash-flow problems and loss of control over the business following death or incapacity.

Two of the most commonly considered structures in this area are Family Investment Companies (FICs) and Trusts. When designed correctly, both can be highly effective tools for protecting wealth and transferring value to the next generation — but only if they are properly structured and aligned with the individual’s tax position.

Why business succession planning matters more than ever in 2026

Several factors have increased the importance of succession planning in recent years:

• frozen tax thresholds, including Inheritance Tax bands,
• steady growth in the value of private businesses and investment property portfolios,
• increased HMRC scrutiny of wealth and ownership structures,
• a rise in family disputes following the death of a business owner.

In practice, this means that Inheritance Tax liabilities often arise unexpectedly and must be settled quickly, sometimes forcing the sale of a business or key investment assets.

Succession planning is therefore no longer a long-term consideration — it is a core part of responsible wealth management.

What is a Family Investment Company (FIC)?

A Family Investment Company is a UK limited company established primarily to hold and manage family wealth, rather than to trade operationally.

How does a FIC work in practice?

• the founder introduces capital or assets (such as cash or investment property),
• retains control through voting shares,
• future generations receive economic growth through non-voting or growth shares,
• the increase in value occurs outside the founder’s personal estate.

Common assets held within a FIC

• buy-to-let and investment property portfolios,
• equity and investment portfolios,
• cash reserves,
• overseas investments.

Key advantages of a Family Investment Company

• retention of control by the founder,
• structured succession planning without immediate transfer of ownership,
• potential reduction of exposure to Inheritance Tax,
• flexibility in income extraction and dividend planning.

Risks and limitations of FICs

• ongoing compliance and administration costs,
• requirement for proper asset valuations,
• complexity of share structures,
• no “one-size-fits-all” solution — each FIC must be bespoke.

Trusts as a succession planning tool

Trusts have long been used in the UK for estate and succession planning, but in 2026 they require careful consideration due to evolving tax rules.

Common types of trusts used in the UK

• discretionary trusts,
• interest in possession trusts.

Trusts and Inheritance Tax

Trusts may be subject to:

• an entry charge when assets are settled,
• periodic ten-year charges,
• exit charges when assets are distributed.

As a result, trusts are not always the most tax-efficient solution, but they can provide enhanced asset protection and flexibility in managing beneficiaries’ interests.

Family Investment Company vs Trust – which is right for you?

There is no universal answer. The choice between a FIC and a trust depends on:

• the overall value of the estate,
• family structure and succession objectives,
• type of assets involved,
• tax residency of the founder,
• long-term control and income requirements.

In many cases, hybrid solutions combining a FIC with a trust are used to balance control, tax efficiency and asset protection.

Common mistakes in business succession planning

Business owners and investors frequently make the following errors:

• using off-the-shelf structures without professional advice,
• failing to obtain proper valuations,
• inconsistency between ownership structures and wills,
• implementing structures without ongoing tax review.

Any of these mistakes can result in unexpected tax liabilities or family disputes.

When should succession planning begin?

The optimal time to plan succession is during periods of growth and stability, not at retirement or in response to a crisis.

Early planning provides:

• greater flexibility,
• more tax-efficient options,
• reduced long-term risk.

Summary

Both Family Investment Companies and Trusts can play a powerful role in business succession planning and wealth protection in the UK in 2026. The key is ensuring that any structure is tailored to the individual’s circumstances, compliant with UK tax legislation and aligned with wider estate planning objectives.