Skandia International expects a "significant" increase in UK resident non-domiciles investing in offshore bonds following last week's Budget announcement.
From 6 April, a non-dom residing in the UK for seven out of ten tax years will need to either start paying tax in the UK on foreign income and capital gains not brought to the UK, or pay a £30,000 annual fixed charge.
Skandia International says for those non-doms who choose not to pay the charge, advisers are likely to consider offshore bonds.
“This would enable clients to defer payment of UK tax until encashment of the bond, when the individual may no-longer be a higher-rate tax payer or may no-longer be UK resident,” it says.
“An offshore bond would also allow withdrawals of 5% without any immediate liability to UK income tax, but care needs to be taken in this area as to the original source of money invested in the bond.”
However, Skandia International says non-doms with overseas assets greater than around £1.5m may be better off opting to pay the £30,000 tax charge.
It also says advisers must consider the impact on all non-dom clients, not just those who have been resident for the past seven years.
“All change brings opportunity and this Budget was no exception. The charge on non-doms is likely to give a significant boost to the offshore bond market,” Skandia tax and financial planning head Colin Jelley says.
“Whatever investment decisions are made, there will continue to be a definite need for advice for this group of people.”
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From 6 April 2019