Cognitive processes underlying a behavioural outcome (like reading ability) and the impact of familial risk (e.g., for dyslexia) have been studied in isolation. We present a novel design, linking the two avenues. How do familial influences impact on children's cognitive skills, which subsequently underlie reading development? Participants from the Familial Influences on Literacy Abilities (FIOLA) Project included 373 children and their parents. We considered three causal routes from parental reading and children's putative cognitive endophenotypes to children's reading. Path analyses showed that half of parental effects on children's reading bypassed and half operated through children's cognitive underpinnings. Spousal correlation was small but significant. Findings do not support a strong hypothesis of cognitive endophenotypes with full mediation. Furthermore, we discuss the use of parental skills as a proxy for offspring's liability. Finally, familial reading difficulties are not fully accounted for by known cognitive skills, which has implications for dyslexia diagnosis.