Rising tax burden boosting appeal of offshore bonds

The growing tax burden placed on savers and investors is boosting the appeal of offshore bonds, which are becoming more relevant to a broader spectrum of wealth, according to Evelyn Partners.

Sales of offshore bonds more than doubled to a record £10.5bn across all providers in the 12 months to the end of June 2025, as investors sought tax-efficient solutions.

Evelyn Partners noted that offshore bonds can offer greater tax efficiency than a UK general investment account and can be an effective estate planning tool in inheritance tax (IHT) mitigation.

The wealth manager said that appeal will continue to grow as 2 per cent increases on investment and savings income take effect, and pensions come into scope of IHT.

“Interest in offshore investment bonds is surging because the rising burden and complexity of tax on both income and wealth is driving a search for more tax-efficiency,” commented Evelyn Partners chartered financial planner and partner, David Little.

“As the tax burden grows across the board, it’s inevitable people will search for ways to relieve the pressure - especially where their wealth could be taxed twice.

“The income tax burden has grown significantly in the last decade, even though rates have remained stable, because thresholds and allowances have been either frozen or cut, at a time when inflation has been elevated.

“And then investments, savings and inheritances are being taxed more heavily too so that people who have worked hard to build their family’s long-term financial security feel pressured into protecting wealth by all legitimate means.”

Little noted that limits on the most familiar tax wrappers, such as ISAs and pensions, were being quickly exhausted by some, resulting in more individuals of a greater wealth range seeking alternative tax-efficient solutions.

However, Little highlighted that investment bonds were inherently complex, with the tax treatment of withdrawals, partial surrenders, segmentation, and timing all needing consideration.

This made advice essential, as poorly executed bond planning could lead to unexpected tax outcomes.

“The lesson for those who think they benefit from offshore bonds is not that they are problematic, but that they demand proper advice and ongoing oversight,” Little continued.

“If used properly as part of a coherent wealth strategy, they are a powerful jigsaw piece to assist with tax optimisation and IHT planning. But when used in isolation, or without a clear understanding of how and when money will be taken out, they can create unnecessary complexity.

“As with all planning, the starting point should be the client’s objectives, time horizon, and likely future tax position - not the solution itself.”

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