Inheritance tax saved by a FIC

From growth. If the parents lend money to the company, the loan stays in their estate at face value, so there is no saving on the original sum. The company invests the money, and the growth belongs mainly to the children's shares. Because that growth is outside the parents' estate, the 40% inheritance tax that would have applied to it is avoided, provided the gifts of shares survive the seven-year period.

Because 40% is the rate of inheritance tax above the nil-rate band, and the growth is the only part that moves out of the estate. The loan itself is still counted. The saving shown is the 40% tax that would have been due on the growth if it had stayed in the estate, which is the most the structure can save before allowing for any other effects.

By default, no. It ignores the £325,000 nil-rate band and the £175,000 residence nil-rate band, so it assumes the growth would have been taxed at 40% in full. If your estate is smaller, or the bands would cover part of the growth, the real saving will be lower. We can model the bands properly on a call.

A gift of shares is generally a potentially exempt transfer, so it becomes taxable if the donor dies within seven years. The value gifted is usually the value of the shares at the date of the gift, which for a newly formed company is small, so the effect is limited. Taper relief can reduce the tax on larger gifts made between three and seven years before death. The calculator does not model this.

Yes, at its face value, to the extent it has not been repaid. That is why the calculator shows the loan separately: the loan is not the saving. Repaying the loan to the parents increases their estate, so some families keep it outstanding or spend repayments, while the loan repayment planner shows how repayments change the remaining balance.

A loan. A gift of cash to the company is generally a chargeable lifetime transfer, with a 20% entry charge above the nil-rate band, so the calculator treats the main funding as a loan and the gift of shares as the only gift. Many families fund by loan for this reason, though some also make smaller cash gifts.

Use a cautious figure that you would be comfortable defending, and test more than one. Investment returns are not guaranteed, and the inheritance tax saving rises or falls with them. A higher rate over a longer period gives a bigger figure, but it may not be realistic. We do not recommend investments, and the result is not a forecast.

The calculator assumes that growth belongs to the children's shares, so the split between children does not change the total estate saving. It matters for fairness, for each child's own tax position and for control. You can use different share classes to give different children different amounts, which is part of the planning rather than something the calculator models.

No. It estimates the inheritance tax saving on growth under a family investment company only. A trust may give a different result, with its own entry charge and 10-year charges. We can compare the two in your own circumstances on a free call, including the control, flexibility and costs of each.

No, it is a rough illustration. It ignores your other assets, allowances, reliefs, the gift with reservation rules and how the shares are actually structured. Tax rules also change. Use it to see the scale of a possible saving, then take advice before acting. All calculations run in your browser, and nothing is stored.