Tax-Effective Investment Advice Demand Likely To Surge, HSBC Life UK Report Says

by | Aug 30, 2023

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· 82% of advisers’ clients are higher rate or additional rate taxpayers but two out of five advisers do not routinely explain the benefits of tax efficiency on investments, research shows

Demand for tax-effective investment advice is likely to increase presenting a major opportunity for advisers to demonstrate their expertise and grow their businesses, new research* from HSBC Life (UK) Limited (“HSBC Life (UK)”) shows.

The research by HSBC Life (UK), titled The Three I’s of Investable Capital, in association with consultancy Technical Connection, found currently 50% of surveyed advisers’ clients are higher rate taxpayers while nearly a third (32%) are additional rate taxpayers.


HSBC Life (UK)’s study found advisers believe clients rate taxation as second only to inflation as the biggest threat to their invested capital and future financial wellbeing – 35% of advisers cited inflation as the biggest threat compared to 27% choosing taxation. Just 19% selected volatility and 18% low returns.

However, research with advisers shows 39% do not routinely discuss the benefits of tax efficiency in relation to investments with clients. Only 27% of clients questioned said advisers routinely discuss the tax efficiency of investments. Almost all (98%) advisers questioned said they believe tax efficiency on capital investments is important to clients while just slightly fewer (96%) of clients said the same.

Not routinely discussing tax efficiency on investments may partly explain why basic tax allowances are not being used in full – the research found advisers estimate that on average 52% of clients fully use the ISA allowance and 47% the pension investment allowance. The study found just one in five (20%) clients fully understand how insurance-based bonds work.


Mark Lambert, Head of Onshore Bond Distribution, HSBC Life (UK), said: “The proportion of clients who are additional rate or higher rate taxpayers will inevitably increase as a result of frozen thresholds, allowances, and exemptions and continuing wage inflation. These drivers point to the fact that clients are more likely to want and need advice on tax effective investment.

“This represents an opportunity to help to promote the benefit of tax allowance optimisation through regular tax health checks. Despite high client concern about inflation and interest in tax efficiency, advisers believe a relatively low percentage of clients know about or use key strategies.”

HSBC Life (UK’s) report analyses the full range of investable capital assets including equities, collective investments such as unit trusts and OEICs as well as ISAs, onshore and offshore bonds, defined contribution, and defined benefit pensions, VCTs, EIS, SEIS, structured investments, and crypto investments.


It highlights how capital investments can be structured to achieve intergenerational and estate planning, as well as the role of initial and ongoing advice in ensuring an optimal outcome from the investment of capital and the potential future tax treatment of capital investments.

Onshore bonds offer zero tax on cash dividends at a policyholder level while non-dividend income is taxed at 20%. Gains within the Bond are subject to UK life fund taxation which means that the policyholder is treated as having paid basic rate tax on these gains. Top slicing relief and 5%p.a. tax deferred rules on withdrawals remain. Lifetime transfers by way of assignment where there is no exchange of money or money’s worth are not taxable events and basic rate tax credit in determining policyholder tax on realised chargeable gains continue.

The HSBC Onshore Investment Bond, a tax effective medium to long term lump sum investment wrapper, can be accessed with a minimum investment of £15,000 providing the potential for capital growth while still allowing clients to make withdrawals from their investment. It offers clients access to around 3,800 funds via open architecture.


HSBC Life (UK) does not replicate funds offered by external fund managers. It enables investment in the funds directly, ensuring that consistency of approach across the investment solutions that advisers recommend to their clients. 

Please click here to download the report:

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