A group structure means one company (the holding company) owns one or more other companies, the trading subsidiaries. The holding company does not trade. It holds shares, receives dividends, and owns assets. The trading subsidiaries do the work.
This is the structure that most UK founders with significant profits eventually move toward. The question is not whether it makes sense, for most businesses above £300,000 annual profit, it does. The question is when to install it and what it unlocks when it is in place.
What a group structure gives you
Asset protection. The trading company carries the operational risk, contracts, employees, liabilities. The holding company sits above it, protected. If the trading company fails, the assets held at holding company level are not exposed to its creditors.
Tax-free dividend flow. Dividends paid from a trading subsidiary to its corporate parent are exempt from corporation tax under the inter-company dividend exemption (assuming the conditions are met). Profits can move up the group without a second layer of tax.
Retained profits at 25%. Profits retained inside the group are taxed at corporation tax rates. 25% for profits above £250,000. Profits extracted personally are taxed at personal rates, up to 45% income tax plus NIC, or 33.75% dividend tax. The group structure allows capital to compound at the lower rate until extraction is planned.
Exit via SSE. When the holding company sells a trading subsidiary, the gain may be exempt from corporation tax under the Substantial Shareholding Exemption. This is the mechanism that allows a business exit to be structured at 0% CGT rather than 18% BADR or 24% standard CGT.
Multiple business lines. A founder with two or three trading businesses can hold them all under one holding company. Capital generated in one subsidiary can be deployed into another via intercompany loans, without triggering a personal tax event.
When it makes sense to install one
The trigger points are: annual profit above £300,000 (the compounding benefit at 25% vs personal rates becomes significant), plans to exit within five years (SSE requires 12 months of holding), more than one trading business, or significant retained profits that are not needed for personal expenditure.
The cost of installing a group structure is typically £3,000 to £8,000 in legal and accounting fees. The tax saving in the first year alone often exceeds that cost.
What it does not do
A holding company alone does not eliminate IHT exposure, does not resolve personal extraction tax, and does not protect assets from a personal insolvency. It is the foundation layer: the Stability layer in the three-layer architecture. The Governance and Expansion layers sit on top of it.
The Capital Audit identifies whether a group structure is appropriate for your current position and what the specific tax saving would be in your first year of operation.
What a Group Structure Is Not
A group structure (a holding company above one or more trading companies) is a Growth-layer tool. It separates assets, enables intercompany dividends to flow tax-free, and creates SSE eligibility for qualifying disposals. Any competent accountant can install one. The Companies House filing takes a week.
What a standard group structure does not include is a constitutional architecture: governance mechanisms that determine how capital is allocated across the group, how decisions are made, how shares are issued and transferred, and how the group functions as a capital-compounding machine rather than just a tax vehicle.
The Expansion layer is what transforms a group structure from a container into a capital architecture. It is drafted by specialist commercial lawyers, not installed as a Companies House filing. The group structure your accountant sets up and the group structure that governs serious capital are not the same thing. The difference is the constitutional layer above it.