Case Study: How Sam & Sarah Future-Proofed Their Property Legacy and Saved £1.1M in IHT
Sam and Sarah, both in their early 40s, are busy professionals with two young children, aged 8 and 6. Like many landlords, they weren’t just thinking about the here and now, they were planning for their future and their children’s too.
Their goal was simple:
• Build a reliable stream of retirement income
• Protect the property wealth they were creating
• Pass that wealth on to their children, without a crippling tax bill
But as they began growing their buy-to-let portfolio, concerns around Inheritance Tax quickly surfaced. If they were to own everything in their personal names, their children could be facing a tax bill of over £1.2 million just to inherit what they’d spent years building.
They needed a smarter structure.
The Solution: A Property Family Investment Company (PFIC)
Working with our team at UK Landlord Tax, Sam and Sarah set up a PFIC - a limited company tailored to their goals.
Here's how it worked:
Control stayed with them:
Sam and Sarah became Directors and held the only voting shares in the company, allowing them to make key decisions about how the business was run.
Their investment was protected:
They loaned £250,000 to the PFIC as a Directors' Loan which could be paid back to them tax-free over time using rental income.
Future growth passed to their children:
We created a second class of shares (B-shares) with rights to capital growth, held for the benefit of their children. This meant any increase in value over time wouldn’t be taxed as part of Sam and Sarah’s estate.
Tax savings were significant:
Instead of paying IHT on a future £3 million valuation, their estate would only be liable for tax on the original £250,000 equity they introduced. That’s a potential IHT saving of £1.1 million, all while keeping income flexibility and control intact.
A Flexible, Family-Focused Structure:
Over the following three years, the PFIC purchased properties worth £1 million, using a combination of buy-to-let mortgages and Sam and Sarah’s deposit funding.
Because they structured the business this way:
• They can take income as dividends, adjusting between themselves for tax efficiency
• They can choose to reinvest profits, pay off mortgages faster, or grow the portfolio
• Their children are protected from future tax exposure without the need for risky gifting or trust complications
The Outcome
• £1.1M Inheritance Tax Saved
• Full control retained over assets and income
• Tax-free repayment of directors' loan possible over time
• Children’s inheritance ring-fenced and protected
Sam and Sarah now sleep better at night knowing their wealth is secure and their family is taken care of for the long term.
