Offshore bond glossary: the UK terms, in plain English

Two vocabularies describe the same contract. The UK market, HMRC's helpsheets and the insurers in Dublin and the Isle of Man say offshore bond, chargeable event and top slicing. The American and continental markets say private placement life insurance. This glossary uses the British words and says where the other ones fit. For the rules in full, start with how an offshore bond is taxed in the UK or browse the UK research library.

5% withdrawal allowance

Each policy year you may withdraw up to 5% of each premium without an immediate tax charge, and unused allowance carries forward for twenty years. The withdrawals are tax deferred, not tax free: they are added back when the final gain is worked out. The 5% withdrawal allowance →

Adjusted net income

The income measure that tapers the personal allowance above £100,000 and removes it above £125,140. The whole chargeable event gain counts towards it in the year of the event, not the top-sliced amount, which is why a large gain can cost the allowance for that year. See the taper in the calculator →

Adviser charge

A fee paid to a financial adviser. Taken from your payment before it is invested, it simply reduces the premium. Paid by the insurer out of the policy, it is a part surrender that uses up the 5% allowance and can create an excess event. Adviser charges and the 5% allowance →

Assignment

The transfer of ownership of a bond, or of some of its segments, by deed. A gift is not a chargeable event, and nor is a transfer between spouses or civil partners living together; a sale is. The new owner inherits the premiums, the allowance and the start date for top slicing. Assigning an offshore bond →

Basic rate credit (tax treated as paid)

On an onshore bond the policyholder is treated as having paid income tax at the basic rate on the gain, because the insurer's fund has already been taxed. A foreign policy carries no credit, so the whole gain is taxed at the policyholder's own rates. The 20% credit, and who it helps →

Capital redemption bond

An investment bond written as a contract for a fixed term, usually 99 years, with no life assured. It is taxed under the same chargeable event rules as a life assurance bond, but the owner's death is not a chargeable event: the bond passes to the heirs with its tax history intact. Capital redemption bonds explained →

Chargeable event

One of the occasions on which UK tax looks at a bond: a full surrender, maturity, the death of the last life assured, an assignment for money or money's worth, or a part surrender that goes beyond the cumulative 5% allowance. Nothing is taxed until one happens. Gifts and fund switches are not chargeable events. How an offshore bond is taxed →

Chargeable event certificate

The insurer's statutory notice that an event has happened and a gain has arisen. It must show the policy, the event and its date, the gain, the number of years for top slicing relief and whether basic rate tax is treated as paid. The two figures go on the foreign pages of the tax return. Reading the certificate →

Chargeable event gain

The profit taxed at a chargeable event. For a final event it is what the policy pays out, plus everything withdrawn earlier, less the premiums paid and any gains already taxed. It is taxed as savings income, at 20%, 40% or 45% in 2026/27, with no capital gains uplift on death. Chargeable event gains and top slicing →

Common Reporting Standard

The international exchange of account information under which an offshore insurer reports a cash value policy each year to the tax authority where the policyholder lives, which passes it to HMRC. A UK resident should assume HMRC knows the policy exists. What HMRC learns →

Deemed gain

The annual charge on a personal portfolio bond: 15% of the premiums and of earlier deemed gains, taxed as income each year with no cash paid out. It is the penalty the personal portfolio bond rules impose. What the 15% charge costs →

Deficiency relief

Relief where a bond ends with a loss after earlier excess gains were taxed: a higher rate taxpayer may set the deficiency against income otherwise taxed at the higher rate in the year the policy ends. It does not help a basic rate taxpayer, and it is claimed on the tax return. Top slicing relief calculator →

Discounted gift trust

A trust that holds a bond from which the settlor keeps a fixed right to regular payments for life. The value given away for inheritance tax is discounted for that right, the rest falls out of the estate after seven years, and the payments are usually taken within the 5% allowance. Discounted gift trusts and loan trusts →

Establishment charge

An insurer's charge taken as a percentage of each premium every year for a fixed period, usually five years, in place of a single initial charge, with an early cash-in charge for the instalments still outstanding if the bond is surrendered within that period. Offshore bond charges →

Excess event

A part surrender that takes cumulative withdrawals past the cumulative 5% allowance. The whole excess is taxed as a gain in that year, however little the bond has grown, which is why large sums are usually taken by surrendering whole segments instead. Excess events explained →

Excluded property

Non-UK property outside the inheritance tax net because its owner is not a long-term UK resident, or, for settled property, because the settlor is not. A bond with an Isle of Man or Irish insurer is non-UK property; whether it is excluded property depends on the owner's or settlor's status, not on the bond. Excluded property after April 2025 →

FIG regime

The four-year foreign income and gains regime that replaced the remittance basis on 6 April 2025 for arrivals after ten consecutive years of non-residence. A chargeable event gain on a bond is not qualifying foreign income, so the regime does nothing for the bond; time apportionment does. Offshore bonds and the FIG regime →

FSCS

The Financial Services Compensation Scheme, which protects policyholders of insurers regulated in the UK if the insurer fails. It does not cover policies issued by Isle of Man, Guernsey or Jersey insurers, which have their own arrangements; the position for Irish and Luxembourg insurers depends on how the policy was written. If an offshore life insurer fails →

General investment account (GIA)

A portfolio held in your own name with no tax wrapper: dividends, interest and gains are taxed as they arise, and on death the capital gains base cost is uplifted. It is the natural comparison for an offshore bond once the ISA and pension allowances are used. GIA vs offshore bond calculator →

Insurance year

The twelve months from the policy start date or its anniversary, which is the period over which the 5% allowance is measured and part surrenders are added up. It is not the tax year, so a withdrawal taken in March can fall into an insurance year that ends after 5 April. How the allowance is measured →

Investment bond

The everyday UK name for either kind of policy when it is bought as an investment rather than for life cover. Insurers, advisers and HMRC's helpsheets all use it. An investment bond is onshore or offshore depending on where the insurer sits. Onshore vs offshore bonds →

Isle of Man policyholder protection

The statutory scheme that stands behind Isle of Man life insurers: it is described as paying up to 90% of the value of a protected contract, funded by a levy on insurers, with no cash cap. Guernsey has no scheme but requires assets covering at least 90% of policyholder liabilities to be held in trust. Jurisdictions for UK residents →

Life assured and policyholder

The life assured is the person whose death ends a life assurance bond and triggers the final chargeable event; the policyholder owns the bond and pays the tax. They need not be the same person, and a bond written on younger lives, or as a capital redemption policy, is not ended by the owner's death. Choosing the lives assured →

Loan trust

A trust to which the settlor lends money that the trustees invest in a bond. The loan can be repaid on demand and stays in the estate; the growth belongs to the trust from the start and is outside it. There is no gift, so no seven-year clock on the loan itself. Discounted gift trusts and loan trusts →

Long-term UK resident

Since 6 April 2025 the test for inheritance tax on worldwide assets, in place of domicile: resident in the UK in at least ten of the previous twenty tax years. The status lasts for three to ten years after leaving, depending on how long you were resident. The long-term residence test →

Number of years

The divisor for top slicing relief, shown on the certificate. For a surrender, maturity, death or sale it is the complete years since the policy started; for an excess event it is the years since the last chargeable event. It is never less than one. Top slicing relief calculator →

Offshore bond

A single premium life assurance policy, or a capital redemption policy, issued by an insurer outside the UK, usually in the Isle of Man, Dublin, Guernsey or Luxembourg, with an investment portfolio inside it. No UK tax is charged on the fund while it grows. HMRC's name for it is a foreign policy, and the gain is taxed as savings income when a chargeable event happens. What is an offshore bond? →

Onshore bond

The same kind of policy issued by a UK life insurer. The insurer pays corporation tax on the policyholders' share of the fund's income and gains at a rate tied to the basic rate, 20% now and 22% from April 2027, and the policyholder is treated as having already paid basic rate tax on any gain. That credit cannot be repaid. Onshore vs offshore bonds →

Personal portfolio bond

A bond whose investments can be selected by the policyholder, a connected person or someone acting for them, beyond the categories the law permits. HMRC taxes it on a deemed gain of 15% a year whether or not anything is paid out. It is the rule a bespoke portfolio must be designed around. The personal portfolio bond rules →

Personal savings allowance and starting rate

A bond gain is savings income, so the £1,000, £500 or nil personal savings allowance and the £5,000 starting rate for savings can be set against it when other income leaves room. Someone with no other income can take up to £18,570 of gain at nil in 2026/27. Bond vs ISA, GIA and pension →

Private placement life insurance (PPLI)

An offshore bond written for one family, with the portfolio managed to order rather than chosen from a fund list and the charges negotiated rather than published. For UK tax it is a foreign policy like any other, and it must stay outside the personal portfolio bond rules. Offshore bonds and PPLI: the UK position →

Relevant property trust

A discretionary or similar trust taxed under the inheritance tax rules for settled property: a 20% charge on gifts above the nil rate band, a charge of up to 6% every ten years and an exit charge when property leaves. The bare trust used for a gift to a child is not one. Inheritance tax planning →

SA106

The foreign pages of the Self Assessment return, where a gain on an offshore bond is entered: the gain at box 43 and the number of years at box 44. A gain on a UK policy goes on the additional information pages, SA101, instead. Where the two figures go →

Segment

One of the identical policies that make up a bond. A £1,000,000 bond is often written as 100 policies of £10,000 each. Segments can be surrendered or given away one at a time, which is how a bond is cashed in gradually or passed to family without ending the whole contract. The 5% allowance and segments →

Settlor and trustees

The settlor puts a bond into trust; the trustees own it and are the persons liable on a gain while it stays in trust, at the 45% trust rate for an offshore bond with no credit. Trustees usually assign segments to a beneficiary before surrender so that the beneficiary is taxed at their own rates. Into a trust and out again →

Temporary non-residence

The rule that catches someone who leaves the UK for five years or less after being resident in four of the previous seven tax years. A gain arising while they are away, on a policy taken out before they left, is taxed in the year they return. Temporary non-residence →

Temporary repatriation facility

The flat charge, 12% in 2025/26 and 2026/27 and 15% in 2027/28, that a former remittance basis user can pay on pre-April 2025 foreign income and gains to bring them to the UK. A bond gain cannot be designated under it; the foreign money that funded the premium can be. The facility and the bond →

Time apportionment relief

The reduction in a gain for the part of the policy period during which the person liable was not UK resident. It applies to UK and offshore bonds alike and reduces the number of years for top slicing by the same years. The certificate normally shows the gain before this reduction. Moving to, returning to or leaving the UK →

Top slicing relief

The relief that stops a gain built up over many years being taxed as if it were one year's income. The gain is divided by the number of complete years the policy has run, the tax on one slice is worked out, and the relief brings the bill back towards that rate. It changes the rate, not the gain. Top slicing relief →

Trust Registration Service

HMRC's register on which a trust holding an investment bond must be registered, with the trustees responsible for keeping it up to date. Registration is separate from the chargeable event rules and from inheritance tax returns. Reporting and registration →

PPLI.com is not authorised by the Financial Conduct Authority and does not give personal advice. This is general information about UK law, not an invitation or inducement to enter into any insurance or investment contract. Policies issued by insurers outside the UK are not protected by the Financial Services Compensation Scheme.