Family investment companies for buy-to-let landlords: what to consider

Landlords planning for the future of a buy-to-let portfolio may want to involve family members in its ownership or consider how it will pass to the next generation. One option is to set up a family investment company.

A family investment company can hold property and be structured to give family members different rights. However, transferring existing properties into a company can involve tax costs, refinancing, and legal work. The structure needs to be considered alongside the landlord’s wider financial and family plans.

If you are considering a family investment company for your property portfolio, contact our solicitors for advice on the company structure and the legal steps involved.

What is a family investment company?

A family investment company, often called an FIC, is a company used by family members to hold and manage investments. These may include residential or commercial property and other assets.

An FIC is not a separate legal category of company. Its purpose and arrangements are shaped through its ownership, articles of association, funding, and any shareholders’ agreement.

Family members can have different roles. For example, some may be directors responsible for managing the company, while others hold shares with particular voting, dividend, or capital rights.

Our guide to setting up a family investment company explains the general legal steps involved.

Can a family investment company hold buy-to-let property?

Yes. A family investment company can hold buy-to-let property, subject to its own arrangements and any lender requirements.

The company might purchase new properties or acquire properties already owned by family members. It may hold a single property or a wider portfolio.

If the company owns the property, the company is the landlord. It receives the rental income and is responsible for the relevant obligations, although directors remain responsible for managing the company and ensuring it meets its duties.

Can I transfer my existing rental properties into an FIC?

A personally owned rental property can be transferred to a company, but the company is a separate legal owner. The transfer is therefore a property transaction, even if you control the company before and after it takes place.

Each property will need to be reviewed, including its title, existing mortgage, and tenancy arrangements. Transferring a portfolio may also involve decisions about whether to move properties together or in stages.

The transfer can have tax consequences. For example, capital gains tax and stamp duty land tax may need to be considered. Where property is transferred to a connected company, stamp duty land tax may be calculated by reference to market value rather than simply the amount paid. GOV.UK

Before committing to a transfer, ask your accountant or property tax adviser to assess the proposed structure and its costs. Your solicitor can then advise on the property transfers and work alongside your advisers to put the agreed arrangements in place.

What happens to the existing mortgages?

A mortgage in your personal name cannot simply be transferred into the company’s name. You will need to check the existing lender’s requirements. In many cases, the mortgage will need to be repaid on completion, with new finance arranged in the company’s name if borrowing is required.

• How much is needed to repay each existing mortgage.
• Whether early repayment charges apply.
• Whether the proposed lender will lend to the company.
• What valuation, title, and tenancy checks the lender requires.
• Whether directors or other family members will need to provide personal guarantees.
• Whether other properties are secured against the same borrowing.

A mortgage broker can help assess the available finance, while your solicitor coordinates the transfer, repayment of existing loans, and new security.

In some cases, you may consider short-term funding before a longer-term refinance. Our article on using bridging finance to transfer property into a limited company explains the issues involved.

How can family members hold shares?

The company can have one or more share classes. The rights attached to each class can be tailored, subject to the company’s documents and the law.

For example, a family may want to consider:

• Who can vote on important decisions.
• Who can receive dividends.
• Who benefits from future growth in the company’s value.
• Whether shares can be transferred outside the family.
• What happens if a shareholder wants to leave or dies.

Different share classes can provide flexibility, but they must be drafted to align with the family’s objectives. Giving a relative an interest in the company may also affect the value and control held by existing shareholders.

Can different family members receive different dividends?

Potentially. Different share classes, sometimes called alphabet shares, can be created with different dividend rights. Whether and how dividends can be paid will depend on the company’s articles, the rights attached to the shares, and the company’s financial position. The issue of shares carrying different rights may have tax implications and should be considered alongside the settlements legislation and other anti-avoidance provisions.

This should not be treated as an automatic way to reduce a family’s tax bill. The tax treatment depends on the arrangements and the people involved, and some arrangements may be challenged by HMRC.

Your accountant or tax adviser should assess the proposed structure before issuing or transferring shares. Our real estate finance solicitors can then prepare the company documents needed to implement the agreed arrangements.

Can parents keep control of the property portfolio?

It may be possible to structure the company so that some family members retain decision-making powers while others hold shares with different rights.

However, control needs to be considered in detail. The articles, shareholders’ agreement, board composition, and lender requirements can all affect who can make decisions.

For example, you may want to decide in advance who can authorise a property sale, refinance, additional borrowing, or a change to the share structure. These arrangements should be documented rather than left to informal understandings.

What if the properties are already held in a company?

If your rental properties are already owned by a company, you may not need to transfer the properties themselves to involve family members. Instead, you may be able to review the company’s existing share structure or ownership.

This could involve issuing new shares, transferring existing shares, or changing the rights attached to them. The right approach depends on the company’s documents, the interests of existing shareholders, and the proposed outcome.

Existing borrowing is also important. A lender may need to consent to a change in ownership or control, and any personal guarantees should be reviewed. Take legal and tax advice before making changes.

Will an FIC reduce inheritance tax?

An FIC can form part of a family’s succession planning, but it does not automatically remove inheritance tax or guarantee that a particular relief will apply. The tax benefits often associated with FICs are typically linked to the future growth of value outside the founder’s estate rather than any automatic inheritance tax exemption.

The outcome depends on how the company is funded, who owns the shares, the rights attached to them, and what happens when value is transferred between family members.

Landlords should also be cautious about assuming that shares in a property investment company will qualify for business relief. Property investment companies will often not qualify for business relief because they are generally regarded as investment businesses rather than trading businesses GOV.UK

Specialist tax and estate planning advice should be obtained before establishing or changing the structure.

Is a family investment company right for every landlord?

No. An FIC may suit a family with clear investment or succession objectives, but it involves setup costs and ongoing company responsibilities. Transferring existing properties may also involve tax, lending, and legal costs that outweigh the intended benefits.

The decision should take account of the properties already owned, existing borrowing, how rental income will be used, and the family’s longer-term plans. An accountant can assess the financial and tax position, while solicitors can advise on the company documents, property transfers, and lender requirements.

Expert advice on family investment companies for property

Our solicitors advise landlords and property investors on company structures, property transfers, and associated finance. We work alongside accountants, brokers, and other advisers to help put the agreed arrangements in place.

Dylan Leet, partner and head of real estate finance, says: 

“A family investment company can provide a framework for managing property and involving the next generation, but the structure needs to reflect the family’s actual objectives. Where properties are already owned personally, the transfer and any existing borrowing need just as much attention as the company’s share structure.”

If you are considering a family investment company for your property portfolio, contact our solicitors to discuss the structure and legal steps involved.