Savers are increasingly looking to move their money overseas in order to avoid the punitive tax changes introduced by Chancellor Rachel Reeves, according to leading wealth managers Quilter Cheviot and Waverton.

One popular method being utilized by savers is the use of offshore bonds, which allow for the growth of investments without immediate capital gains or income tax implications. These bonds enable investors to withdraw up to 5% of the original investment annually tax-free, with any unused portions carrying over for future use.

Gains from offshore bonds are taxed as income at marginal rates when withdrawn, often benefiting from lower rates by spreading out income over time. This flexibility and control over tax liabilities have made offshore bonds an attractive option for a wider range of clients in the current harsh tax environment.

For example, a high-earning NHS doctor with a £2m portfolio is now considering placing some of his investments in an offshore bond to take advantage of the tax deferral benefits. This strategy, once reserved for high-net-worth individuals, is now being utilized by a broader range of clients seeking to minimize their tax burden.

The recent tax changes announced in the Budget, including higher capital gains tax rates for basic and higher-rate taxpayers, have further incentivized savers to explore offshore options. Additionally, the freezing of income tax thresholds and reductions in allowances have led to a significant increase in clients seeking advice on offshore bonds as a tax-efficient investment strategy.

By moving assets into offshore bonds, investors can strategically manage their tax liabilities, take advantage of tax-free allowances, and potentially pass on assets to family members tax-efficiently. The ability to assign offshore bonds to another person allows for the utilization of tax-free allowances, such as personal savings allowances and starting rate for savings, providing additional tax-saving opportunities.

Offshore bonds also offer the benefit of tax-deferred withdrawals, allowing investors to make 5% withdrawals of the original capital each year without incurring any immediate tax implications. This tax-deferred approach enables investments to compound more quickly, as taxes are not deducted on gains or income earned within the bond.

However, it is important to note that tax implications may arise if withdrawals exceed the 5% annual allowance, the bond is surrendered, or in the event of a chargeable event, such as the death of the insured individual under the bond.

Overall, the use of offshore bonds as a tax-efficient investment strategy is becoming increasingly popular among savers looking to navigate the evolving tax landscape and maximize their investment returns. By seeking advice from wealth managers and tax experts, individuals can explore the benefits of offshore bonds and tailor their investment strategy to minimize tax liabilities and maximize wealth accumulation.