A lot of agencies reach a stage where things start getting bigger. New service lines, a production arm, a training brand, an acquisition on the horizon.
That’s usually when the “Should we have a holding company?” question appears.
It sounds grand. It sounds corporate. It sounds like something the big boys do.
But is it relevant for a creative agency? And what are the actual tax and accounting consequences?
Let’s break it down in plain English.
A holding company is simply a company that owns another company.
Your trading company — the one your clients work with — becomes a subsidiary.
The holding company doesn’t typically do client work. Instead, it might:
It's the umbrella at the top of the group.
If all your money sits inside your trading company, it’s exposed to:
Moving excess profits up to the holding company ring-fences cash.
If the trading subsidiary gets into trouble, the holding company’s assets are generally protected.
This is one of the biggest reasons growing agencies adopt this structure.
Investors often prefer to put money into a holding company because:
For creative agencies planning to launch strategy units, video divisions, digital products, or sister studios, a holding company means you can create new subsidiaries without affecting your original trading brand.
A holding structure opens up more exit options:
✔ Sell the trading company only
You get to keep the holding company, along with its cash, IP, or investments.
✔ Sell a portion of the group
You could sell a subsidiary (e.g., your production arm) without selling the core agency.
✔ Bring in a new partner more cleanly
They can invest in the holding company, which then controls everything beneath it.
This is standard practice in the M&A world because it reduces risk and makes due-diligence simpler.
Your agency brand is valuable — sometimes more than the business itself.
You might want the holding company to own:
Your trading company then “licenses” those assets from the holding company.
If the trading company ever hits trouble, the IP stays safe.
A big advantage of a group structure under UK rules is that dividends paid from a UK trading subsidiary to a UK holding company are usually tax-free.
This means:
1. You earn profit in the trading company
2. You pay Corporation Tax on those profits
3. You then pay a dividend to the holding company
4. No extra tax is triggered at that point
This allows the holding company to build up an investment pot which could be used for:
Many agencies start side ventures. Examples:
If each sits as a subsidiary, you avoid:
If one idea fails, it does not take the whole agency with it.
Each company in the group pays Corporation Tax on its own profits.
Where it can get interesting is:
✔ Group loss relief
A loss-making subsidiary can often surrender its losses to another profitable group company. Great for new ventures that need time to ramp up.
✔ No tax on inter-company dividends
One of the biggest perks. Most dividends paid between UK companies in the same group are tax-free.
✔ Tax-free reorganisations
If structured properly, forming a holding company using a share-for-share exchange can often be done without triggering Capital Gains Tax (CGT).
This must be done correctly — normally by a qualified accountant or tax adviser.
Each company is treated separately for VAT unless you apply for a VAT group.
Pros of a VAT group:
Cons:
For most creative agencies, VAT grouping is optional rather than essential.
The holding company doesn’t magically reduce Income Tax or Dividend Tax for directors.
You still pay personal tax when profits are extracted from the holding company to you.
The benefit is what happens before that point — your profits can move between companies tax-free, be reinvested, and be protected.
Two sets of accounts.
Two Confirmation Statements.
Two Corporation Tax returns.
Two payroll schemes if both employ staff.
Money moving between companies must be documented properly:
Your accountant will normally take car of this — but it must be done cleanly.
If the holding company becomes the parent of a “group”, you may need to prepare consolidated accounts unless:
Most small creative agencies will qualify for the exemption — but this needs checking each year.
A holding company can make huge sense if:
But it does mean more admin, more annual filings, and slightly more complexity.
Many creative agencies start with a single trading company and then restructure into a holding company setup later — typically around the £750k–£2m turnover mark or earlier if you’re planning multiple ventures.
A holding company isn’t about being “big”.
It’s about being smart, future-focused, and structured in a way that protects what you’re building.
If you’re considering it, it’s always worth chatting through:
A well-designed group structure can give creative agency owners flexibility, protection, and a more valuable business — without making your day-to-day operations any more complicated.