Does a family investment company pay 19% or 25% Corporation Tax?
Short version. A family investment company pays the full main rate if it is a close investment-holding company (CIHC). From 1 April 2023 that is 25%, even on small taxable profits. The company’s purposes decide its status, not the family ownership label.
On this page
1. Understand the treatment
HMRC needs the company’s status to apply the right Corporation Tax rate. First establish whether it is a close company, then apply the purpose test throughout each accounting period. Read the complete statutory purposes and conditions.
Commercial trading and commercial letting of land can be permitted purposes. Letting to a connected person or specified family members does not count as commercial for this test. A group holding company can also qualify through the controlled-company conditions. Holding a portfolio of listed shares or bank deposits is not itself a permitted purpose. Some trading income does not automatically settle the question.
2. Fictional worked example
This fictional comparison covers 1 April 2025 to 31 March 2026. Both companies are UK resident, with £40,000 taxable total profits and the same augmented profits, no associated companies and no ring fence profits. The ordinary company meets the small-profits conditions.
| Company treatment | Corporation Tax |
|---|---|
| Ordinary company at 19% | £7,600 |
| CIHC at 25% | £10,000 |
This compares taxable profits, not the value of the investment portfolio or every cash receipt. Short periods and associated companies change the ordinary company’s limits.
3. Common mistakes
- Assuming every family investment company has the same tax treatment.
- Calling connected-person letting commercial without checking section 18N(3).
- Assuming a small amount of trading income rules out CIHC status.
4. How to file
SimpleCompanyTax prepares supported micro-company returns from your figures. Follow the exact filing steps and review each return’s computation before approving the filing. For more background, read the full CIHC definition and the marginal-relief comparison.
This is general guidance. Your company’s treatment depends on its circumstances. Decide the classification and claims yourself or with your accountant.