What’s an offshore bond?
As the name suggests, these products are based outside of mainland UK, usually somewhere with more favourable tax levels, like the Isle of Man, Luxemburg or the Channel Islands.
They work by investing in things like stocks and shares, mutual funds or properties in these offshore areas where tax is paid at lower levels (sometimes 0%) on profits than you’d pay at home. UK tax is only payable if the money from these profits is brought into the country.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Who are they good for?
If you’re a high-rate tax payer, an offshore bond might help you reduce your liability by deferring tax. Providing you don’t take out more than 5% of each investment every year for up to 20 years, you can defer the tax amount.
Ex-pats can benefit from this feature too, especially if they’re planning to move back home once their tax liability’s reduced through retirement or something similar.
If you withdraw more than the 5% or cash in the bond in full, you’ll be charged the full tax amount at UK levels. This also applies to some other situations.
Offshore bonds are also good for people looking to expand their investment portfolio – sometimes overseas companies and stock markets can outperform or own, so it can be worth looking further afield.
Think an offshore bond could be for you?
Please send us a message using the form on the right-hand side of this page and we’ll call you back to discuss it.
Tax treatment varies according to individual circumstances and is subject to change.
Offshore Bonds are not regulated by the Financial Conduct Authority
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