Estate planning often feels like driving a loaded lorry without brakes while the hill gets steeper each year. Asset values rise, children grow up, the business changes shape and the tax rules shift beneath your tyres. For many successful families, the question is not “How much is the estate worth today?” but “What happens if it doubles while still sitting inside my personal IHT exposure?”
A Self-Administered Family Office, built around a bespoke holding company, offers a practical mechanism for putting brakes on the hill. The technique uses a share-for-share exchange into fixed-value Freezer shares. The effect is similar to estate planning used in Canada and the US for decades. You exchange growth for certainty. You block future IHT growth in your personal estate. Then you decide, calmly, what to do next.
The stage setting: share-for-share exchange
Imagine your operating company and investments as a portfolio of engines generating combustion and torque. You swap those directly held engines for shares in a bespoke holding company. That exchange can be structured tax neutrally using well-trodden UK reorganisation rules. You receive Freezer shares at a fixed economic claim, often equal to current market value of the business. Voting power may sit elsewhere, typically in Alphabet Voting shares.
Once the freeze happens, personal estate growth stops on that line. If the company doubles in value over five years, the extra value accumulates outside your personal estate, provided you have shifted growth to different share classes held by trusts or the next generation.
Why the freeze helps
Inheritance tax bites on the value at death. If you own a business worth £10m today and it rises to £25m over a decade, that £15m of increase forms part of your personal exposure unless you do something about it. By freezing at £10m through Freezer shares, you stop the clock. From that point, the estate is no longer expanding into higher tax exposure. It is like putting cargo into a bonded warehouse. The position becomes stable, allowing you to decide the route to succession without panic.
Opening the door for trusts and the next generation
Once frozen, new growth can be issued to discretionary family trusts in the form of Growth shares. The trusts can be settled on children or the wider family as beneficiaries. Growth then accumulates outside the settlor’s personal estate. With trading assets, Business Property Relief can help up to the current £2.5m cap per individual, provided the company remains mainly trading.
If the company is investment-heavy, you can split the trading subsidiaries into the SAFO wrapper to capture BPR, while leaving the investment arm in a separate entity for other strategies. That is corporate carpentry. You pry apart trading and investment functions to secure the relief where it belongs and isolate the investment assets for their own plan.
Using the nil-rate band with Freezer shares
Freezer shares allow a peculiar but useful tactic. Because their value is fixed, you can gift slices into discretionary trusts using the nil-rate band. The current £325k allowance can be used every seven years. Gift £325k worth of Freezer shares today, wait out the seven-year clock, then repeat. Over time, the freezer is chipped away without triggering large lifetime charges.
Families sometimes match this tactic with term life insurance sized to cover potential IHT if death occurs within the seven-year span. Insurance buys time. The nil-rate band buys leverage. The result is a steady transfer at controlled cost. If the shares qualify for BPR at settlement and at death, the failed gift issue becomes a non-event.
Employee Benefit Trusts for longer arcs
Some families prefer to place slices of value into an Employee Benefit Trust. Unlike classic staff reward schemes, an EBT in the SAFO context can carry voting or growth shares intended to support a wider purpose: future employees, long-term stewardship or philanthropic goals. EBTs cannot redeem shares to individuals in a way that creates personal capital gains planning. Their function is different. They act like ballast, keeping the ship balanced across generations and management teams.
It is a subtle way to align the firm with people who will build it long after the founder stops turning the wheel.
Investment companies and the £2.5m BPR cap
The UK government now caps BPR at £2.5m per individual for trading assets. That makes structuring more intricate for property groups, family investment companies and finance businesses. Investment-heavy groups often separate out the trading subsidiaries, which qualify for BPR up to the cap, while leaving the investment portfolios in a different box.
The investment box can then be tackled with whole life insurance, offshore structures or even a later migration if the family leans international. The key is to stop the growth in the personal estate first. Once frozen, you can assess the investment puzzle without having HMRC meter running at full tilt.
Redemptions and income streams
Freezer shares often carry redemption rights. Over time, they can be redeemed to provide income to the founder at capital gains rates (currently 14 to 24 percent). This contrasts with dividend taxation, which is climbing to 10.75, 35.75 and 39.35 percent. The SAFO allows the founder to live off redeemed capital rather than taxable dividends, without pulling new risk into the personal estate.
What the freeze buys: time
Time is often the most scarce resource in succession planning. People say they will plan when they retire, when the children grow up or when the tax rules settle. Years pass. Values rise. Estates become bloated for tax purposes. Then someone falls ill and decisions are made in haste.
The SAFO freeze is a way to halt the compounding IHT risk early. After the freeze, you can test scenarios:
• How much income does the founder need each year?
• How fast should Freezer shares be redeemed?
• Should Growth shares be allocated evenly among children?
• Is an EBT helpful for governance or continuity?
• Should a separate trusteeship hold the voting?
• Should the investment arm be reorganised offshore or insured?
Time allows clarity. Families can assign roles, teach financial skills and create governance that holds up under stress. It replaces the usual estate scramble with something more akin to corporate planning.
A brief illustration
Take a business worth £10m. The founder is sixty. Children in their twenties. If no action is taken and the business climbs to £25m over ten years, the estate swells. If the company remains personally held, inheritance tax at 40 percent could consume £10m at death on the uplift (subject to reliefs). The family may need to sell shares, borrow against the company or liquidate investments to pay HMRC, often at the worst strategic moment.
Contrast a freeze. Founder swaps £10m for Freezer shares. Trust buys Growth shares for a nominal cost. The company later reaches £25m. The extra £15m sits in the trusts, not the estate. Founder’s Freezer claims still equal £10m and can be redeemed gradually at capital gains rates. The trusts hold the next generation’s opportunity. The IHT exposure is tied to the £10m, not the £25m. That difference is the value of the pause button.
Key constraints
This method is powerful but not wizardry. Four constraints matter.
First, trading status must be preserved where BPR is needed. Investment creep can harm reliefs.
Second, the correct share rights must be drafted. Alphabet Voting, Freezer, Growth and Dividend classes must interplay cleanly.
Third, trustees must be competent. An EBT or discretionary trust needs directors who understand cash flow, redemptions and governance.
Fourth, families must do the cultural work. Succession is not only about money. It is expectations, purpose and relationships.
A SAFO freeze does not solve everything at once. It buys peace of mind. It turns a rising IHT liability into a static one. It moves future growth outside the estate. It gives parents room to plan. It gives children time to learn. And it avoids the usual fire sale at death.
Financially, the freeze is a lever. Socially, it is a bridge. It carries the family from wealth to institution.
