Offshore bond tax calculator

An offshore bond's fund suffers little or no tax internally, so the gain rolls up gross year to year. On full surrender, death, maturity or an excess event the whole chargeable-event gain is charged to income tax as savings income of that year — there is no credit against the real liability for tax paid inside the fund, because effectively none was (the s.531(1) deemed credit exists only inside the top-slicing relief calculation, below). The gain sits above other income but below dividends in the band stack, and counts towards adjusted net income for the personal-allowance taper.

TAR can apply to qualifying offshore and onshore policies. Whether it is due can depend on relevant residence, beneficial ownership or assignments, rights held as security, and trust or estate history, so UK residence throughout the policy term alone does not settle the question. This calculator does not calculate TAR and is limited to gains for which you can confirm, after those checks, that no TAR is due.

A gain that built up over several years is charged in a single year, which can push it through the higher or additional-rate threshold. Top-slicing relief compares the tax on the whole gain with the tax on the annual-equivalent “slice” (the gain divided by the complete policy years) scaled back up. The personal savings allowance and starting-rate band are recalculated at the notional slice income for gains from 6 April 2021 (the post-2021/22 IPTM3820 recalculation). The deemed basic-rate credit does not reduce the real liability on an offshore bond, but ITTOIA 2005 s.531(1) preserves it “for the purposes of calculating relief under section 535” — so inside the relief calculation it is deducted from both the total liability and the total relieved liability (IPTM3830), exactly as for an onshore bond.

The gain is computed the same way for both bond types, and both get top-slicing relief. The difference is the deemed basic-rate credit an onshore bond carries against the member's real liability and an offshore bond does not: it reflects tax paid inside the onshore fund (ITTOIA 2005 s.530). For the same gain and the same taxpayer, the offshore tax is therefore higher by the credit amount — the trade-off for gross roll-up while the bond is held.

One qualification that catches spreadsheets out: s.531(1) is an express carve-out applying the s.530(1) deemed credit to offshore and foreign policy gains for the purpose of calculating relief under s.535. So Steps 1 and 4 of the relief computation carry the credit for an offshore bond too, and the top-slicing relief figure is identical to the equivalent onshore case — the credit simply does not carry through to the real liability. The credit is restricted under s.530(3)–(5) to basic rate on the gain (or slice) less any personal allowance set against it, so it is not a flat 20% of the gain.

Top-slicing relief is available only where an individual is liable on the chargeable event gain, and the personal allowance, personal savings allowance and starting rate for savings are individual reliefs too. Where UK trustees are the chargeable persons the whole gain is charged at the trust rate with none of those reliefs. On the no-TAR-due basis stated above, a £50,000 offshore gain over 10 complete years is £22,500.00 on trustees against £6,286.00 for an individual with no other income. The calculator computes for an individual policyholder unless you select UK trustees as the chargeable person; where the trust is settlor-interested the gain is instead assessed on the settlor as their own income.