Two-thirds unaware bonds aid inheritance and tax planning

As Inheritance Tax rules develop, many miss opportunities to transfer wealth more effectively

Nearly half of UK adults plan to pass on their wealth to future generations, but most are unaware of how to do so in a tax-efficient way. This gap between their intentions and knowledge suggests many could miss opportunities to organise gifts or inheritances that safeguard more of their assets for loved ones.

Recent research highlights that while 47% plan to leave an inheritance and 38% intend to transfer assets directly to their children, two-thirds of individuals are unaware of how bonds could be utilised for inheritance and tax planning[1]. Raising awareness of available options can help families better align their legacy objectives with strategies that optimise tax efficiency.

Growing focus on intergenerational wealth

The desire to protect family wealth has grown amid rising living costs and significant changes to Inheritance Tax (IHT) rules. Adjustments announced in the 2024 Autumn Budget, including making defined contribution pensions liable for IHT from 2027 and introducing new limits on business and agricultural relief, have caused many individuals to re-evaluate their estate plans.

With frozen tax thresholds and increasing uncertainty about future rates, 36% of people now say they are worried about their financial future. This concern has prompted more families to seek professional advice on how best to structure their finances for long-term stability and effective wealth transfer.

Why onshore bonds are gaining attention

If appropriate, one option to consider is onshore bonds. These investment tools can be useful in estate planning, allowing individuals to grow their savings within a tax-efficient wrapper while retaining flexibility in how and when funds are accessed.

When incorporated into a broader financial plan, onshore bonds can help reduce Inheritance Tax liabilities and facilitate wealth transfer. They can be passed to another family member without causing an immediate tax charge, meaning the new owner inherits both the bond’s history and any remaining tax-deferred allowances. This allows for ongoing tax efficiency while keeping the investment within the family.

Flexibility can provide tax savings

Bonds are also frequently used within trust structures. Trustees gain from holding a non-income-generating asset, which simplifies administration and allows them to make withdrawals using the 5% tax-deferred allowance when funds are required.

Furthermore, bonds can be organised as multiple clustered policies, allowing trustees to allocate part or all of the bond to beneficiaries at a later date. This flexibility can provide tax savings when beneficiaries eventually encash their shares, as it minimises potential Income Tax exposure within the trust.

These features make onshore bonds an attractive planning tool for families aiming to combine growth, control, and inheritance efficiency, particularly as more traditional options, such as pension transfers or business relief, become restricted under new legislation.

Bridging the knowledge gap

However, awareness of bonds remains limited. Over two-thirds of the research respondents admit they know little about how bonds can be utilised for inheritance or tax planning, with many underestimating how bonds could support other estate planning tools like trusts, pensions, and Individual Savings Accounts (ISAs).

As intergenerational wealth transfer becomes more widespread, we can assist you in navigating the complexities of tax laws and establishing lasting legacies. A clear, informed strategy can ensure wealth is transferred smoothly and efficiently, minimising unnecessary tax liabilities while safeguarding financial stability for future generations.

Have you arranged to transfer your wealth?

By combining our professional advice with practical planning tools, such as onshore bonds, we can ensure that you achieve both growth and peace of mind, ensuring your assets benefit those who matter most. We can help you explore how investment bonds, trusts, and other strategies can support tax-efficient inheritance planning and safeguard your legacy. To find out more, please contact us.

THIS ARTICLE IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE. TAX TREATMENT DEPENDS ON INDIVIDUAL CIRCUMSTANCES AND MAY CHANGE IN THE FUTURE. THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE ESTATE PLANNING, TAX ADVICE, OR TRUSTS. THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, SO YOU COULD GET BACK LESS THAN YOU INVESTED.

Source data:

[1] UK Wealth Transfer and Tax Planning Report 2025: https://www.lv.com/about-us/press/two-thirds-unaware-of-how-bonds-can-help-with-inheritance-and-tax-planning