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Onshore and offshore bonds

Investment bonds are usually single premium life insurance contracts. They are sold by life insurance companies to allow customers to invest in a range of funds managed by professional investment managers. 

Bonds can provide long-term capital growth but can be used by individuals as a potential source of income.

Onshore and offshore

There are 2 types of bonds: onshore and offshore. They are structured in similar ways but the tax treatment is different.

With Onshore bonds the insurance company pays tax at a basic rate on income and gains, meaning basic rate taxpayers will have no further income tax to pay. 

Higher rate taxpayers may have to pay the difference between the basic and higher rates. Additional tax will only be due after a chargeable event (such as the surrender of the policy or the death of the policyholder) results in a chargeable gain. 

Offshore bonds are not taxed by the insurance company. However investors will be liable for income tax and any chargeable gains at their marginal rate.

There are more assets available to invest in with offshore bonds compared to onshore bonds. Investment types include:

  • life funds
  • collective funds
  • bank deposits
  • structured products.

Get in touch with our team to talk about investing.

Tax rules and allowances are not guaranteed and may change in the future. The value of investments can fall as well as rise and you may not get back the amount you originally invested.

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