Personal portfolio bond (PPB)

The personal portfolio bond rules are UK anti-avoidance rules in the Income Tax (Trading and Other Income) Act 2005, sections 515 to 526. They stop personal assets being placed inside a life policy to postpone tax under the chargeable event regime. A policy that is a PPB loses that postponement and is taxed on a deemed gain each year.

When a policy is a PPB

A policy is a PPB if its benefits follow the value of property or an index, and the policyholder, someone connected with them or someone acting for them can select that property or index. Selection does not make a policy a PPB where it is limited to the categories below and the same choice is open to all the insurer's policyholders, or to a class identified in the insurer's published marketing.

• Permitted property: the insurer's internal linked funds; authorised unit trusts; investment trusts and overseas equivalents; open-ended investment companies; cash; certain life policies; interests in non-UK unit trusts and other non-UK co-ownership schemes; UK REITs and overseas equivalents; authorised contractual schemes and reserved investor funds (contractual schemes).
• Permitted indices: the retail prices index and similar indices published by foreign governments, and any published index of prices of shares listed on a recognised stock exchange.

Where the insurer, or a manager appointed under the insurer's own agreement, makes the decisions, HMRC's guidance is that the policy is generally not a PPB. HMRC's example of a PPB is a policy whose value follows shares in the policyholder's own private company.

Worked example

Illustrative figures, not a forecast. A policy that is a PPB has a single premium of US$1m and no withdrawals. Each year's deemed gain is 15% of premiums plus earlier deemed gains, less any earlier part-surrender gains, taxed as income whatever the investments did:

• Year 1: 15% of US$1,000,000 = US$150,000.
• Year 2: 15% of US$1,150,000 = US$172,500.
• Year 3: 15% of US$1,322,500 = US$198,375.

Deemed gains of US$520,875 are taxed over three years, regardless of the actual return.

In an international IUL

An IUL credits interest by reference to a share index chosen by the policyholder, so the index rules apply. Where each index offered is a published index of prices of shares listed on a recognised stock exchange, open to all policyholders or a published class, choosing it does not by itself make the policy a PPB. An index added later must meet the same tests.

In a PPLI structure

A properly structured PPLI invests through suitably diversified insurance dedicated funds, with an investment manager appointed by the insurer making the decisions. Shares in open-ended investment companies and interests in non-UK unit trusts or co-ownership schemes are permitted property, and HMRC's guidance is that a manager appointed under the insurer's own agreement generally acts for the insurer, not the policyholder, so PPB treatment is avoided and a UK-resident policyholder keeps the chargeable event treatment of an offshore bond.

Common questions

How do I know if my policy is a personal portfolio bond?

HMRC says most policies are not PPBs, and the insurer can confirm a policy's status. The test turns on the policy terms: what can be selected, by whom, and whether the choice is open to all policyholders or a published class.

What happens if a PPB holder becomes UK resident?

Before the end of the insurance year in which the policyholder became UK resident, the insurer must vary the policy so that it is no longer a PPB, or the policy must be surrendered. Otherwise a deemed gain can arise at the end of that year.

Go deeper: how PPLI works.

Sources

• ITTOIA 2005 s.516: meaning of personal portfolio bond
• ITTOIA 2005 s.518: the index categories
• ITTOIA 2005 s.520: the property categories
• ITTOIA 2005 s.522: annual calculation, 15% of the excess
• HMRC IPTM3600: personal portfolio bonds, background
• HMRC IPTM7725: investment advisers appointed by the insurer
• HMRC IPTM7775: permitted indices
• HMRC IPTM7793: non-resident policyholder becomes UK resident

Last reviewed November 2026.