Taking money out of a family investment company

Yes. Once the company repays your loan, the cash is yours again, and any amount you keep forms part of your estate for inheritance tax. That is the trade-off for tax-free access: the more you draw, the less stays outside. Many families take only what they need to live on and leave the rest in the company, so that the loan, and the growth on top, are not turned back into estate cash.

If the company pays interest on a shareholder's loan, it must deduct basic-rate income tax, 20% at the time of writing, from the payment and report and pay it to HMRC quarterly on form CT61. The lender receives the interest net and is taxed on the gross amount through their tax return. A loan with no interest does not need CT61, which is why many family loans are interest-free.

You can, but it is not what we recommend. A dividend waiver is a decision by a shareholder to give up a dividend so that others can be paid more. HMRC can challenge waivers as settlements, so the waived income may be taxed on the person who gave it up. Alphabet shares are separate classes, each with its own right to dividends, so the board can pay different amounts to different classes without anyone waiving anything. They are cleaner, and we prefer them to waivers.

Usually not. A discretionary trust pays income tax at 39.35% on dividends, regardless of the lower rates the individual beneficiaries might pay. Trustees can then pay income on to beneficiaries, but the tax credit rules are technical, so the route is planned in advance. The £500 de minimis can help a small trust. The trust rate is one reason dividends to the trust are usually kept modest or reinvested, with the growth in value doing the work.

Yes, if it pays for real work done. A salary is deductible only if it is paid for genuine services, and for an investment company it is claimed as a management expense. It is subject to income tax and employer and employee national insurance, so it is rarely the most efficient route. Fees that are too high, or not linked to genuine work, risk being disallowed, and benefit linked to gifted shares can cause inheritance tax problems.

Employer Class 1 national insurance is 15% on pay above the secondary threshold of £5,000 a year in 2026/27. The Employment Allowance of £10,500 may reduce the bill, but the company must meet the eligibility rules, which we check, especially where the director is the only employee. Employee contributions are also due. Taken together with income tax, a salary can cost more than dividends or loan repayments.

Usually loan repayments, as they are not taxed as income, which makes them the cheapest route in tax terms, while dividends are taxed on the recipient at 10.75%, 35.75% or 39.35% above a £500 allowance. The right order depends on your tax position, the children's needs, how much you want to keep inside the company and how the loan is documented.

The loan is only a route back to your own capital. Once it is repaid, the options are dividends on shares you hold, interest on any new loan you make, and pay for work you do. Dividends on freezer shares can be set at a modest fixed rate, if the articles allow it. Many families top up the loan in later years, for example with sale proceeds, so that there is more to draw.

It can. Loan repayments return your own cash to you, so what you do not spend is back in your estate. Dividends on shares you gave away go to the new owners, so the money stays outside your estate, but it is taxed on them. Dividends on shares you keep end up in your hands. The calculators show the effect of different withdrawal patterns, which is worth understanding before you draw.

In Jones v Garnett, the House of Lords held that dividends on ordinary shares given outright to a spouse were not the donor's income, because the shares were not wholly or substantially a right to income. HMRC follows this in its manual. It shows that shares carrying real capital rights can be safe, but shares with only income rights, such as non-voting shares with no capital entitlement, can fail. Share design matters.

Not especially. Tax is paid in the company and again when dividends are paid out, which for an additional-rate taxpayer comes to about 54.5% on profits that were taxed at 25% in the company. Loan repayments avoid that, but they return capital rather than create income. The structure suits long-term reinvestment and passing on growth, rather than providing a salary replacement, and we say so plainly.

No, not for an investment company. The relief needs a trading company, or the holding company of a trading group, throughout the two years before the disposal. A distribution on winding up is normally taxed as a capital gain on the shares, but anti-avoidance can treat it as income where you carry on a similar activity afterwards. Closing a company is a separate decision that needs advice.

No. Many families take little or nothing, and let the company reinvest. There is no requirement to pay dividends, and loan repayments are on terms you agree with the company. If you do not need the money, leaving it in is usually the most tax-efficient choice, as it avoids a second layer of tax and keeps growth building for the next generation. The company is not designed to pay out a fixed income.

As a movement on the director's or shareholder's loan account, supported by a loan agreement and a board decision to repay. The accounts should show the balance each year. This matters because repayments are only tax-free if the money is genuinely a repayment of a loan, not income. A clear paper trail also answers any question from HMRC, and lets your accountant prepare the accounts without having to query the figures.

Yes. Repayment of the loan is a return of your own money and is not taxed as income. Interest the company pays is income to you, taxable at your own rates, and the company deducts and reports basic-rate tax on it. The interest is deductible for the company. Individuals' savings rates rise to 22% basic, 42% higher and 47% additional from 6 April 2027, so interest is often kept low or nil.

Not as of right. Dividends are declared by the directors, usually the parents, and paid to the classes of shares they choose. Shares can be non-voting, and the articles and shareholders' agreement can limit when and how shares are sold. Children can be given a say as they mature, but control normally stays where the family has decided. This is one of the things that makes a family investment company attractive to parents.