Higher rate taxpayers should consider cash investment bonds as an alternative to high interest savings accounts, according to HFM Columbus.
The IFA firm's director Marcus Carlton says higher rate taxpayers can benefit from tax breaks of up 7.95%, as well as better gross equivalent rates, by choosing investment bonds that invest in cash. Investment bonds can also give better security than online accounts offered by foreign lenders, he adds.
The group recommends bonds such as the AIG Premier Bond as a 'must have' for a higher rate taxpayer’s savings portfolio.
Carlton says: “While an AIG bond will deliver similar 6% plus gross returns for higher rate tax payers (6.13% for no notice accounts, typically 6.8% for notice accounts) – similar to one of the higher paying online savings’ bank deposit accounts - its investment bond structure is the real interest for higher net worth investors,” he explains.
Carlton says the account sees only basic rate tax deducted from interest payments, with higher rates only charged at the point of surrender, giving investors control over their tax payments.
Cash investment bonds also allow income to be withdrawn at up to 5% per year without incurring tax liability, and can be put in trusts or gifted, allowing for inheritance tax planning.
HFM Columbus says these types of savings can be a major alternative to foreign online deposit accounts, which only protect the first £35,000 invested. They also require investors to jump through the bureaucratic hoops in the account’s home country.
AIG’s product offers 100% protection on the first £2,000, with a further 90% on the balance, with no upper limit.
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