Revolut offers option to invest in bonds but experts warn about tax implications

The money app, which claims to have 2.8 million users in Ireland, will allow its customers to invest into corporate and government bonds, and get regular fixed-rate payments of up to 5.5pc annually (before tax).

However, financial experts have said the tax on bonds is often higher than on savings, and is complicated with different tax rules for different types of bonds. People who invest in bonds through Revolut will have to file a tax return if they make gains.

Revolut said bonds are a good starting point for investing, offering stability, the opportunity to diversify the portfolio and learn about investing.

It also offers customers here the option to invest in the shares of companies based in the European Union and the US and EU shares and exchange traded funds (ETFs), and now it is adding bonds.

Director of public affairs at Chartered Accountants Ireland, Cróna Clohisey, said the tax on the interest on government bonds here is at the taxpayer’s marginal rate, which means it is 52pc and up to 55pc for the self-employed.

The tax on ETFs is 41pc if the ETF is domiciled in the EU, but higher if it is domiciled off-shore.

Ms Clohisey said the taxation of corporate bonds is complex.

Corporate bonds attract capital gains tax of 33pc on gains, but there is a separate rule for interest earned if they are sold within two years.

Finance Minister Michael McGrath said recently he was considering changes to the tax treatment of investment funds, but there was no mention of bonds.

Revolut said its investment services in the European Economic Area (EEA) are provided by Revolut Securities Europe UAB (Revolut).

Both governments and corporations issue bonds as a means to raise capital, offering investors the chance to effectively lend money in exchange for periodic interest payments and eventual repayment of the principal amount.

Different bond types offer various risk and return profiles, and they should be assessed accordingly, Revolut said.

It will offer customers the option to trade in almost 40 corporate and government bonds and will expand the list in the upcoming months.

The minimum amount to start investing in bonds is €100, with a fixed fee per trade of either 0.25pc or $/€1, whichever is higher.

Other fees may apply, such as currency exchange fees and regulatory fees.

General manager at Revolut Bank UAB, Ireland Branch, Maurice Murphy, said: “Bonds trading is just another way in which we are solving all things money for our customers in Ireland and we expect this to be a very useful addition for those wishing to grow their wealth.”

Financial adviser Liam Ferguson of Co Offaly-based Ferguson and Associates said direct trading in bonds is only suitable for experienced investors and as part of a diversified portfolio.

“I would have a concern that this and other apps would encourage trading rather than investing. Frequently trading in and out of shares, ETFs or bonds is more likely to lose you money than long-term investing,” Mr Ferguson said.

In the last three weeks Revolut shook up the savings market here by offering its customers rates of up to 3.49pc on instant access accounts.

It also offers car insurance, credit cards, loans and has Irish Ibans. It plans to launch mortgages here.