Onshore investment bonds are emerging as an effective alternative to General Investment Accounts (GIAs) as demand for tax-efficient investment solutions grows, according to a new report from HSBC Life.
GIAs remain popular for their flexibility, allowing investors to hold a wide range of assets with no investment limits.
However, income generated within a GIA is subject to income tax, dividend tax and capital gains tax (CGT).
Research for HSBC Life’s The Three I’s of Investable Capital 2025 report found that nearly six in ten (58%) advisers want more information and support from providers to better understand recent CGT changes.
The CGT annual exempt allowance has been cut to £3,000, down from £12,300 in 2023, while the CGT rate has increased to 18% for basic rate taxpayers and 24% for higher rate taxpayers.
The dividend allowance has also been reduced to £500 from £2,000 in 2022/23.
Nearly two in five (38%) advisers said they would like providers to better articulate the benefits of onshore investment bonds, including their tax efficiency.
The report, produced in partnership with Technical Connection, highlights that onshore investment bonds offer simpler tax administration. Gains within the bond are subject to internal life fund taxation, meaning clients do not need to file a tax return until a chargeable event occurs.
In contrast, GIA investors must report capital gains or losses annually.
Funds within an onshore investment bond can also be switched without triggering tax liabilities, unlike GIAs where fund switches may be subject to tax.
Investors can withdraw up to 5% per annum of premiums paid without immediate tax implications, with further withdrawals potentially benefiting from top-slicing relief.
Another key advantage is the ability to assign some or all of the bond to another person, potentially enabling tax savings if the assignee is a lower-rate or non-taxpayer.
To help advisers compare wrappers, HSBC Life has launched an online Investment Wrapper Calculator tool available on its website.
Mark Lambert, head of onshore bond distribution at HSBC Life (UK), said: “Onshore investment bonds are an increasingly attractive and flexible proposition for advisers and clients wishing to hold a range of assets in a single wrapper. They deserve serious consideration for their tax deferment and management qualities once ISA and pension opportunities have been maximised.”
The HSBC Onshore Investment Bond, which requires a minimum investment of £25,000, gives access to around 3,800 funds through open architecture.
The product allows investors to benefit from capital growth while maintaining withdrawal flexibility and consistency across investment solutions recommended by advisers.