Assigning an offshore bond: gifts to children, transfers between spouses, trusts and sales

What an assignment is

An assignment transfers ownership of the policy, or of some of its segments, from one person to another. The policy itself continues; only the name on it changes. The law on how it is done is old. The Policies of Assurance Act 1867 allows assignment by endorsement on the policy or by a separate instrument, and provides that the new owner cannot enforce the policy against the insurer until written notice of the assignment has been given to the insurer's principal place of business (Policies of Assurance Act 1867, ss.3 and 5). In practice the insurer supplies a deed of assignment, both parties sign it before a witness, and it is lodged with the insurer, who records the change. There is no stamp duty: since 1 December 2003 stamp duty applies only to instruments relating to stock and marketable securities (FA 2003 s.125).

A change of legal title only, for example placing the policy in the name of a nominee or custodian while the beneficial owner stays the same, is not an assignment for tax purposes and has no consequences. What follows is about changes of beneficial ownership.

When an assignment is a chargeable event, and when it is not

The list of chargeable events in ITTOIA 2005 s.484 includes an assignment of all the rights under the policy only if it is "for money or money's worth". A gift is not for money or money's worth, so a gift of the whole policy is not a chargeable event at all. It is not that the Act exempts gifts; it simply never brings them in. A gift of some segments, which is a part assignment, cannot be a chargeable event either, and since 6 April 2001 it is not treated as a part surrender (IPTM7360).

Section 487 then disregards three kinds of assignment even where there is consideration: an assignment by way of security for a debt, an assignment on the discharge of such a debt, and an assignment between spouses or civil partners living together. The last of these is the one families use.

Divorce is the common hard case. An assignment made under a court order is not for money or money's worth, so it is not a chargeable event. A transfer under a private separation agreement with no court order can be for money's worth, because each side gives up claims in return, and HMRC's manual sets out the principle at IPTM7360 and the detail at IPTM7370 to IPTM7385. A couple dividing a bond on separation should have the order cover it.

A sale is a chargeable event for the seller. The gain is the price received plus earlier withdrawals less premiums and earlier gains. The buyer inherits the premiums paid under the policy, and the seller's gain is deducted from any later gain as a gain already charged (s.491); only for a capital redemption policy does the price paid replace the earlier premiums (s.494(2)). Sales of bonds between unconnected people are rare; sales within a family are usually better done as gifts.

What the new owner inherits

The gain on a chargeable event is worked out by reference to the policy, not the person. Total benefits less total premiums paid under the policy less gains already charged (s.491; s.494). The 5% allowance is built up on the premiums paid under the policy, whoever paid them. The number of years for top slicing on a final event runs from the start of the policy (IPTM3830). So a daughter who receives segments her father bought twelve years ago surrenders them as if she had held them for twelve years, with his premiums as her deduction and his unused allowance as hers. The only thing that changes is whose income the gain is, and at whose rate it is taxed.

Residence follows the same logic. Since 6 April 2013 the reduction for years of non-residence under s.528 is worked on the residence history of the person liable during the period they held an interest, with one exception: where the policy came from a spouse or civil partner under s.487, the earlier period is added and the spouse's residence is used for it (s.528(6) to (8); IPTM3731). A non-resident child who receives segments and surrenders them while non-resident has no UK liability on the gain at all, subject to the temporary non-residence rule where the child was recently UK resident.

A worked example: segments to an adult daughter

A father paying additional rate tax, with £200,000 of income, bought an offshore bond twelve years ago for £1,000,000 in 100 segments. It is worth £1,600,000. His daughter earns £30,000. He assigns 25 segments to her by deed. The segments carry £250,000 of premium and are worth £400,000, so a gain of £150,000 sits inside them.

Her personal allowance is lost in the main calculation because the full gain, not the slice, counts towards adjusted net income; the relief calculation restores it under the rule in FA 2020 s.37, which is why her relief is so large. And her slices of £12,500 each sit entirely within her basic rate band, so top slicing brings the whole gain down to 20%. Spreading the surrender over three tax years would also keep her adjusted net income below £100,000 and save the £2,514. Our top slicing relief calculator reproduces every line of both columns.

Whether the daughter should surrender at all is a separate question. She could hold the segments, draw 5% a year, or wait for a year without a salary. The point of the assignment is that the choice is now hers, at her rates.

Inheritance tax on the gift

A gift of a policy or of segments to an individual, or to a bare trust, is a potentially exempt transfer, and falls out of account if the donor survives seven years. A gift into a discretionary or other relevant property trust is a chargeable lifetime transfer, taxed at 20% above the available nil rate band of £325,000. The value transferred is the open market value of what is given, but not less than the premiums paid under the policy less any sums already paid out, with a reduction where the policy is unit-linked and the units have fallen in value (IHTA 1984 s.167). In the example above the value transferred is £400,000, the market value of the 25 segments, because that exceeds the £250,000 of premiums. The floor applies to lifetime transfers only; on death the policy is valued at market value in the ordinary way. A transfer between spouses or civil partners is covered by the spouse exemption, subject to the limit where the recipient is not a long-term UK resident.

Transfers to a spouse or civil partner

An assignment between spouses or civil partners living together is disregarded under s.487 whether or not there is consideration, and is covered by the spouse exemption for inheritance tax. A higher rate spouse can move segments to a basic rate or non-taxpaying spouse before a surrender, so that the gain uses the recipient's personal allowance, £5,000 starting rate for savings and £1,000 personal savings allowance, and is then taxed at 20% rather than 40% or 45%. And for a couple where one is leaving the UK or has recently arrived, the residence history used for the s.528 reduction is the recipient's own for the period they held the policy plus the assignor's for the period before, so the couple's combined residence history is preserved rather than lost. The insurer's deed is the same as for any other assignment.

Children, adult and minor

Gifts of segments to adult children are the most common assignment in practice, and the worked example above shows why. The child surrenders at their own rates with top slicing over the full life of the policy, can use their own allowances, and the parent has made a potentially exempt transfer at the value of the segments.

Minors are different. A child under 18 cannot give the insurer a valid receipt or contract, and insurers will not accept a direct assignment to a minor. The route is a bare trust: the parent or grandparent assigns the segments to trustees who hold them absolutely for the child, and the child is the person liable on any gain (IPTM3250). Where a parent, rather than a grandparent, funds the bare trust, the industry's settled view is that the parental settlement rule in ITTOIA 2005 s.629 treats a gain over £100 in a tax year as the parent's income while the child is under 18 and unmarried; HMRC's insurance manual does not address the point expressly, so it is best treated as the prudent reading rather than a published HMRC statement. Grandparents are not caught by s.629, which is one reason bonds for school fees are so often funded by them. The usual plan is for the trustees to assign segments to the child outright at 18, after which the child surrenders at their own rates.

Into a trust and out again

An assignment from the settlor to trustees is not normally for money or money's worth, and nor is an appointment from trustees to a beneficiary, so neither is a chargeable event (IPTM7385). The beneficiary who receives segments then surrenders them as owner, with top slicing over the full policy life and at their own rates, which is almost always better than the trustees surrendering at the 45% trust rate with no credit for a foreign policy. For inheritance tax, the gift into a discretionary trust is a chargeable lifetime transfer and the appointment out is an exit charge, calculated on the time since the last ten-year anniversary. A UK beneficiary of a non-resident trust can be taxed on a bond gain under the transfer of assets abroad rules instead, without top slicing, which is a reason to keep the trustees UK resident where a UK family is involved. Our page on discounted gift trusts and loan trusts with an offshore bond covers the structures that use these assignments.

The paperwork, and what to keep

Ask the insurer for its deed of assignment, complete it for the segments concerned, have both parties sign before an independent witness, and send the original to the insurer with the policy schedule. Keep the insurer's confirmation, a note of the segment values on the date of the gift, and the premium history, because the new owner will need the premiums and the policy start date for the gain calculation, and the donor's executors will need the value for the inheritance tax return if the donor dies within seven years. Where the gift is to a trust, the trustees' resolution and the trust deed go in the same file. When the new owner eventually surrenders, the insurer issues the chargeable event certificate in the new owner's name with the years counted from the original start date; our page on reading a chargeable event certificate explains the entries. Switching funds inside the bond, by contrast, needs no deed at all, as our page on switching funds, managers or insurer explains.

Questions about assigning a bond

Sources and authorities

Read as at 19 October 2026 for the tax year 2026/27. The worked example is hypothetical; the figures were produced with our top slicing relief calculator, which follows HMRC's method in IPTM3820 to IPTM3850.

• ITTOIA 2005 s.484: chargeable events, including assignment for money or money's worth. s.487: disregarded assignments. s.491 and s.494: calculating the gain and the deductions. s.528: reduction for non-UK policy years after an assignment.
• HMRC Insurance Policyholder Taxation Manual: IPTM7360 (assignments), IPTM7385 (trusts and divorce), IPTM3250 (who is liable, including bare trusts), IPTM3731 (time apportionment after 2013), IPTM3830 (number of years).
• IHTA 1984 s.167: value of a life policy on a lifetime transfer. FA 2003 s.125: abolition of stamp duty except on stock and marketable securities. Policies of Assurance Act 1867: form of assignment and notice to the insurer.
• Insurer technical guidance (secondary sources): M&G, what you need to know about assignments of bonds; Standard Life, gifting bonds to children; Aberdeen techzone, taxation of bonds in trust, on the parental settlement rule and non-resident trusts.

Last updated: 19 October 2026. See our editorial standards for how articles are researched and corrected.