Interest in offshore investment bonds has jumped as the growing burden of tax drives investors to search for more tax-efficient investments.
New investment into offshore bonds reached a record £10.5 billion in the 12 months to the end of June 2025, more than doubling from £5.1 billion the previous year.
David Little, chartered financial planner at Evelyn Partners, said: “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 said the limits on tax wrappers like ISAs and pensions can be quickly exhausted, particularly for high earners who have no savings allowance and might be subject to the tapered annual pensions allowance.
Unlike investments in a general investment account, where the holder has to pay tax annually on income and any capital gains above their exemptions, income and capital gains can accumulate within the bond without tax being deducted.
Traditionally, an offshore investment bond has been viewed as an alternative to building up large sums in a general investment account but Evelyn Partners said tax changes mean the appeal of offshore bonds is broadening.
Little said: “When capital gains tax rates were 10 to 20%, the annual exemption was £12,300, and the dividend allowance was £5,000, you could let wealth build up in a general investment account as the capital gains tax could be managed.
“However, fast forward to this year and with dividend and capital gains tax allowances now pretty much meaningless and tax rates hiked, a large general investment account is now a tax headache.
“Where the complexity of setting up an offshore investment bond might previously have swayed many investors to stick with a general investment account, the feeling that investments have suffered a quite punishing tax crackdown is pushing many towards this more sophisticated solution.”
Little added: “Greater complexity in tax and estate planning means offshore bonds are becoming more relevant to more situations.
“I always say control and flexibility are the two key features of a good wealth strategy and offshore bonds can fit as an investment and tax planning piece in the wider ‘jigsaw puzzle’ of wealth management. The popularity of these products will only grow with the current outlook for taxation.”
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