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UK Tax & Wealth Management

Information and background on Wealth Management Inheritance Tax, Investments, SIPPS, Non Doms & Tax.


Onshore and Offshore Life Assurance

Are you looking for a tax efficient way to leave something behind for your loved ones? Are you concerned about the slice HMRC will take off your life insurance pay out should you pass away? If so, a life assurance bond could be the solution you are looking for.

As HMRC becomes increasingly aggressive, life assurance bonds are legitimate ways for managing your tax liability. Life assurance bonds benefit from a unique tax position and could save your family a considerable amount of money if the worst should happen. This manifests in a number of ways.

Firstly, if you are the holder of an onshore life assurance bond, the company with which you hold it will pay corporation tax at 20%. However, due to the way in which the tax is calculated this rate is often lower and sometimes substantially. Whilst there may be more tax to pay, this is deferred until the bond is cashed in and it is not until this point that your tax status is assessed.

When the bond is cashed, you will be liable to pay income tax on any gain you have made, although this is subject to an effective tax credit of 20%, which has been paid for by the company. As a result, most basic-rate tax payers will have no more tax to pay although higher rate tax payers may be liable for a further amount.

Offshore bonds work in a similar way, but are more suitable for investors who wish to mitigate inheritance tax liabilities or who are planning to retire abroad.

Another unusual feature of both onshore and offshore life assurance bonds is the ability for investors to withdraw up to 5% of the original investment every year for up to 20 years without incurring an immediate tax charge. This is one of the reasons the bonds are popular with people hoping to supplement their income throughout their retirement.

If you are considering investing in either an onshore or offshore life assurance bond it is advisable to seek financial advice.

Onshore and Offshore Life Assurance

Hopefully, these will provide some useful background on the issue, and equip you to make informed decisions and choices in this most financially sensitive of areas.

If you would like further assistance or more information on this subject please contact us through this email link

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