As a small business accountant working with limited company directors across Glasgow, I often get asked the same question:
“Can I share the success of my company with family—without giving up control or creating tax problems?”
In many cases, the answer is yes. With the right structure in place, it’s possible to reward family members for their support, reduce your household tax bill, and plan for the future—all while maintaining control of the business.
One of the most effective tools for this is the use of alphabet shares.
What Are Alphabet Shares?
Most small companies are set up with just one type of share—usually ordinary shares—where every shareholder has the same voting rights and the same entitlement to dividends.
Alphabet shares give you more flexibility.
They allow you to create different classes of shares (e.g. A shares, B shares, C shares), each with custom rights around:
- Dividend entitlement
- Voting power
- Capital rights (e.g. share of proceeds if the company is sold)
This lets you distribute profits in a more targeted way—without handing over control.
Example Setup
- You, the director, hold A shares with full control and voting rights.
- Your spouse holds B shares, allowing you to pay them dividends when it suits.
- Your adult child holds C shares, with no voting rights and optional or capped dividends.
You control when and how dividends are declared for each class. This flexibility lets you split income within your family in a way that’s both legal and tax-efficient—if structured properly.
Why Make Family Members Shareholders?
Many of my clients are family-run businesses where partners or adult children help out behind the scenes. Even where family members aren’t on payroll, it’s common to want to reflect their contribution or spread financial rewards.
Alphabet shares can help you:
✅ Recognise real support
Reward a spouse or adult child who contributes time, energy, or skills—without setting up formal employment.
✅ Reduce household tax bills
Distribute dividends to a spouse in a lower tax band and reduce your total combined tax.
✅ Plan for succession
Ease the future handover of shares or build a structure that supports gradual gifting to children.
✅ Retain full control
Keep voting rights to yourself—even if you share the profits.
Realistic Example
Let’s say you run a small company in Glasgow:
- You take a £12,570 salary plus £30,000 in dividends each year.
- Your spouse informally helps with admin or marketing but isn’t on payroll.
If you issue B shares and allocate some dividends to them, you can spread income across two tax bands. If your spouse is a basic-rate taxpayer, this can create meaningful tax savings without increasing total payouts.
What You Need to Get Right
While alphabet shares can be effective, they need to be implemented carefully. Here’s what to watch:
📄 Company Articles
Your Articles of Association must permit multiple share classes. Often this requires a formal update to your company’s constitution.
⚠️ Settlements Legislation
HMRC can challenge “artificial” income shifting. To stay safe, the recipient should contribute to the business in a genuine, meaningful way.
🧾 Paper Trail
Board minutes, share certificates, dividend vouchers, and Companies House filings all need to be accurate and complete.
🔮 Future Implications
Share structure decisions today affect:
- Inheritance tax
- Business Property Relief eligibility
- Business sale proceeds
- Director exit strategies
Should You Use Alphabet Shares?
In some cases, yes—it’s a no-brainer.
In others, it adds unnecessary complexity for limited gain.
If you:
- Take all profits personally today
- Have a partner who supports the business
- Are thinking long-term about succession
…then alphabet shares could be a powerful part of your setup.
How I Help Glasgow Clients Decide
When I work with small business owners in Glasgow, we don’t start with tax codes or legal clauses. We start with:
- What do you want to achieve as a family?
- How much control do you want to keep?
- Where do you see your company in 5–10 years?
Then we map the structure—from a tax, legal, and personal perspective—to fit your goals, not just what’s popular online.
Thinking About Sharing Company Ownership With Family?
Whether you’re planning for tax efficiency, succession, or simply want to recognise support from a partner or adult child, alphabet shares could help.
👉 Contact Glasgow Accountants – Practical, clear advice on structuring your company shares in a way that fits your business, your family, and your future.
