Investment Bonds
Investment bonds are offered by life assurance companies to investors with a lump sum to invest. Officially they are life assurance contracts but the element of life assurance is very low and their main use has been as an investment product.
The initial investment in to the bond is usually invested in to unit trusts according to the requirements of the investor.
These bonds do have many uses but you should seek professional advice if you are thinking of investing in a bond.
They can be useful for higher rate taxpayers in certain situations, and may be used to shelter capital through a discounted gift trust for inheritance tax purposes.
Capital gains made within the bond are not chargeable to capital gains tax and the eventual gain realised on sale of the bond can be free of income tax for basic rate taxpayers provided the gain made on the bond does not exceed a certain level.
Again the tax treatment of bonds can be a source of confusion for investors, so do seek advice if you are not sure.
The charges related to bonds however often make them an unattractive prospect for investors. The initial charges can be significant on these products so do check if you are considering a bond investment.
Tax levels, bases or reliefs referred to are those currently applying but are subject to change. The tax treatment of investments will depend on the individual circumstances of the investor.
