Offshore bonds, in technical terms, are non-qualifying whole of life insurance policies. In practical terms, a tax efficient ‘wrapper’.
Table Of Contents
Offshore Life Insurance Investment Bonds
What are offshore bonds?
Why are offshore bonds so tax efficient?
There may be some tax to pay when a ‘chargeable event’ occurs (which will be expanded upon) but a key benefit for higher rate tax payers is that they can defer paying this tax until they are basic rate tax payers, i.e. when they enter retirement.
Bonds are also assignable, so they can be assigned to a spouse who pays a lower rate of income tax.
What are chargeable events?
What level of tax is due?
If you are a basic rate tax payer and the level of the gain means your income has entered the higher rate or additional rate bracket, there is an option for ‘top slicing’.
What is top slicing?
Alternative to Pensions
Although bonds do not benefit from the tax relief of pensions, for people who were previously contributing over £50,000 a year, the tax efficient environment of an offshore bond has proved a very popular alternative.
Inheritance Tax Planning
There are more benefits of offshore bonds which are beyond the scope of this blog. I will happily provide further information if required.