What is a Bond?
Investment bonds are usually classed as single premium, non-qualifying (the policy does not benefit from the tax advantages available to qualifying policies), whole-of-life assurance policies. They can be held on a single or joint life basis.
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Types of Bonds available
UK Investment Bonds are non-income producing investments and so have a different tax treatment from other UK based investments. This can provide valuable tax planning opportunities for individuals.
The funds underlying the bond are subject to UK life fund taxation meaning that you are treated as having paid Income Tax at the basic rate on the amount of your gain. This notional tax is not repayable in any circumstances. You will have no liability to Capital Gains Tax or basic rate Income Tax on bond gains.
You can withdraw more than the 5% a year tax-deferred allowance.
If you are a higher or additional rate taxpayer or the profit (gain) from your bond takes you into a higher or additional rate tax position as a result of any of the above events then you may have an Income Tax liability. Top slicing relief may assist in reducing the rate of tax charged by applying a spreading mechanism.
An offshore investment bond is an investment wrapper that can be used as an investment vehicle to control whenyou pay tax, how much you pay and whom you pay it to. Offshore investment bonds are also referred to as portfolio bonds and tax wrappers.
An offshore investment bond is a wrapper set up by a life insurance company and domiciled in a jurisdiction with a favourable tax regime, such as the Isle of Man, Luxembourg, or Guernsey.
Increasingly, international clients are also opting to use Dublin to benefit from perceived increased regulatory protection and tax efficiency.
Internationally, offshore bonds are typically provided by global life insurance companies.