An Onshore Bond is a UK-issued, life-insurance-based investment product that allows you to invest a lump sum into a range of funds for medium to long-term growth (5+ years). It offers unique tax benefits, including tax-deferred withdrawals and strategic planning options not available with many other investment wrappers.
Onshore bonds are often segmented into multiple policies, enabling flexible withdrawals and efficient tax planning. There are two main types:
- Life Assurance Bond — linked to one or more lives assured and often used in estate planning.
- Capital Redemption Bond — no lives assured, offering a fixed term (commonly 99 years) and useful in trust planning.
Key Benefits:
- Tax deferral — 5% annual withdrawal allowance, cumulative for up to 20 years.
- Estate planning compatibility — can be assigned to others or placed in trust without triggering an immediate tax charge.
- No contribution limits — suitable for large lump sums.
- Investment flexibility — wide choice of funds and professional portfolio management.
- Policyholder protection — UK-issued and covered by the Financial Services Compensation Scheme (FSCS).
While internal taxation is applied at basic rate (currently 20%), this can be advantageous for basic rate taxpayers, as no further tax is usually payable on withdrawals within allowances. Higher or additional rate taxpayers may have additional liabilities, which can be managed through strategies like top slicing relief, assignments, and segment surrenders.
Onshore bonds also integrate effectively with trust arrangements, offering a means to reduce inheritance tax, streamline probate, and provide ongoing income for beneficiaries via the 5% withdrawal facility.
At Tacit, we offer discretionary management for onshore bonds in partnership with AJ Bell Securities Ltd, ensuring secure asset custody and specialist administration while we focus on achieving your investment goals.
Download the full guide to learn more about eligibility, tax treatment, estate planning opportunities, and how an Onshore Bond could fit into your financial plan.
