Gilts Understanding

ChilliBob

Wow, this detail is very useful and interesting, thanks guys. I shall sit on my calculator for a bit seeing how the prices move. 

So right now we're fairly close to a coupon date, about what 5-6 weeks away, so, the dirty price will be approaching the higher bounds, and the whole accrued income loss side of things will also be at its greatest. 

Doctor_Who

aroominyork said:

masonic said:

aroominyork said:

Very helpful. Also important that you must declare accrued interest if you sell between coupon dates.

It would be interesting to know how much help people get via consolidated tax certificates from their investment provider for gilts.

Very interesting point. My Intervactive Investor consolidated tax certificate shows the gilt coupon paid on 31/1/23 but there is no mention of the accrued interest paid when the gilts were bought in September 2022.

The certificate shows the coupon income in a section grouped with unit trust dividends under a column headed "Dividends/Interest Paid". The next column is headed "Equalisation". It's a shame that isn't "Equalisation/Accrued interest".

Some very useful information in this thread - thanks!

I've just bought some Gilts through Interactive Investor (very easy and used my trading credit). The contract note shows a line with 'Interest +136 days' and a deduction of £9.67. From my calculations this is the 'accrued income loss'. So you wouldn't think it would be too difficult for II to include this on the CTC.

GeoffTF

masonic said:

aroominyork said:

GeoffTF said:

aroominyork said:

cwep2 said:

ChilliBob said:

 This clean/dirty price.. if I look on II I see this:
https://www.ii.co.uk/bonds/united-kingdom-025-31012025/LSE:TN25

So how does the clean/dirty side of things work then? - I can see it's about interest, so as I understand it if you purchased the day after the coupon was issues then clean and dirty are probably almost identical, if you purchased the day before then the prices would be at their widest difference?

In practice I'm not sure what that means if one was to purchase a trance of TN25 for example. It looks like you're saying you'd buy for X but then the broker would take X+y (where y is the dirty price difference)..... 

More importantly though, since you pay income/interest tax on the coupons, if you buy the bond the day before the coupon (using £50k = coupon of £62.50 paid twice a year) and you pay the dirty price including over £60 of accrued interest it would be unfair for you to pay tax on all of that £62.50 coupon - so you only pay on the coupon - the dirty price adjustment when you bought it. This is the key bit of info you may need to remember about the dirty price adjustment otherwise you'll pay to much tax.

Is the point that on your self-assessment you deduct the accrued interest you pay at purchase from the first coupon payment, when calculating interest for tax purposes?

If you buy a security with accrued interest, the next interest payment that you receive will be taxable. But, because you’ve already paid an extra amount to buy the security, you can get tax relief under the Accrued Income Scheme. The extra amount you’ve paid is an ‘accrued income loss’. You deduct this from the interest that you get.

https://www.gov.uk/government/publications/accrued-income-scheme-hs343-self-assessment-helpsheet/hs343-accrued-income-scheme-2019

Very helpful. Also important that you must declare accrued interest if you sell between coupon dates.

It would be interesting to know how much help people get via consolidated tax certificates from their investment provider for gilts.

iWeb shows accrued interest on the contract note, which is where it belongs. If your broker does not show the accrued interest, you can get it from Tradeweb.

aroominyork

GeoffTF said:

masonic said:

aroominyork said:

GeoffTF said:

aroominyork said:

cwep2 said:

ChilliBob said:

 This clean/dirty price.. if I look on II I see this:
https://www.ii.co.uk/bonds/united-kingdom-025-31012025/LSE:TN25

So how does the clean/dirty side of things work then? - I can see it's about interest, so as I understand it if you purchased the day after the coupon was issues then clean and dirty are probably almost identical, if you purchased the day before then the prices would be at their widest difference?

In practice I'm not sure what that means if one was to purchase a trance of TN25 for example. It looks like you're saying you'd buy for X but then the broker would take X+y (where y is the dirty price difference)..... 

More importantly though, since you pay income/interest tax on the coupons, if you buy the bond the day before the coupon (using £50k = coupon of £62.50 paid twice a year) and you pay the dirty price including over £60 of accrued interest it would be unfair for you to pay tax on all of that £62.50 coupon - so you only pay on the coupon - the dirty price adjustment when you bought it. This is the key bit of info you may need to remember about the dirty price adjustment otherwise you'll pay to much tax.

Is the point that on your self-assessment you deduct the accrued interest you pay at purchase from the first coupon payment, when calculating interest for tax purposes?

If you buy a security with accrued interest, the next interest payment that you receive will be taxable. But, because you’ve already paid an extra amount to buy the security, you can get tax relief under the Accrued Income Scheme. The extra amount you’ve paid is an ‘accrued income loss’. You deduct this from the interest that you get.

https://www.gov.uk/government/publications/accrued-income-scheme-hs343-self-assessment-helpsheet/hs343-accrued-income-scheme-2019

Very helpful. Also important that you must declare accrued interest if you sell between coupon dates.

It would be interesting to know how much help people get via consolidated tax certificates from their investment provider for gilts.

iWeb shows accrued interest on the contract note, which is where it belongs. If your broker does not show the accrued interest, you can get it from Tradeweb.

Yes, it is on the contract note (also on ii) but a key purpose of a consolidated tax certificate is to help you fill in your self-assessment accurarately and fully. Does the iWeb CTC show accrued interest? (I have written to ii - watch this space for their reply.)

ChilliBob

GeoffTF said:

masonic said:

aroominyork said:

GeoffTF said:

aroominyork said:

cwep2 said:

ChilliBob said:

 This clean/dirty price.. if I look on II I see this:
https://www.ii.co.uk/bonds/united-kingdom-025-31012025/LSE:TN25

So how does the clean/dirty side of things work then? - I can see it's about interest, so as I understand it if you purchased the day after the coupon was issues then clean and dirty are probably almost identical, if you purchased the day before then the prices would be at their widest difference?

In practice I'm not sure what that means if one was to purchase a trance of TN25 for example. It looks like you're saying you'd buy for X but then the broker would take X+y (where y is the dirty price difference)..... 

More importantly though, since you pay income/interest tax on the coupons, if you buy the bond the day before the coupon (using £50k = coupon of £62.50 paid twice a year) and you pay the dirty price including over £60 of accrued interest it would be unfair for you to pay tax on all of that £62.50 coupon - so you only pay on the coupon - the dirty price adjustment when you bought it. This is the key bit of info you may need to remember about the dirty price adjustment otherwise you'll pay to much tax.

Is the point that on your self-assessment you deduct the accrued interest you pay at purchase from the first coupon payment, when calculating interest for tax purposes?

If you buy a security with accrued interest, the next interest payment that you receive will be taxable. But, because you’ve already paid an extra amount to buy the security, you can get tax relief under the Accrued Income Scheme. The extra amount you’ve paid is an ‘accrued income loss’. You deduct this from the interest that you get.

https://www.gov.uk/government/publications/accrued-income-scheme-hs343-self-assessment-helpsheet/hs343-accrued-income-scheme-2019

Very helpful. Also important that you must declare accrued interest if you sell between coupon dates.

It would be interesting to know how much help people get via consolidated tax certificates from their investment provider for gilts.

iWeb shows accrued interest on the contract note, which is where it belongs. If your broker does not show the accrued interest, you can get it from Tradeweb.

Interesting, I have both iweb and ii at my disposal, not often thay iweb seems the better choice.. Perhaps it's reporting works out clearer in this case then? I mean, I have both one is £3.99 trading credit, the other £5, so there's not much in it! 

GeoffTF

aroominyork said:

GeoffTF said:

masonic said:

aroominyork said:

GeoffTF said:

aroominyork said:

cwep2 said:

ChilliBob said:

 This clean/dirty price.. if I look on II I see this:
https://www.ii.co.uk/bonds/united-kingdom-025-31012025/LSE:TN25

So how does the clean/dirty side of things work then? - I can see it's about interest, so as I understand it if you purchased the day after the coupon was issues then clean and dirty are probably almost identical, if you purchased the day before then the prices would be at their widest difference?

In practice I'm not sure what that means if one was to purchase a trance of TN25 for example. It looks like you're saying you'd buy for X but then the broker would take X+y (where y is the dirty price difference)..... 

More importantly though, since you pay income/interest tax on the coupons, if you buy the bond the day before the coupon (using £50k = coupon of £62.50 paid twice a year) and you pay the dirty price including over £60 of accrued interest it would be unfair for you to pay tax on all of that £62.50 coupon - so you only pay on the coupon - the dirty price adjustment when you bought it. This is the key bit of info you may need to remember about the dirty price adjustment otherwise you'll pay to much tax.

Is the point that on your self-assessment you deduct the accrued interest you pay at purchase from the first coupon payment, when calculating interest for tax purposes?

If you buy a security with accrued interest, the next interest payment that you receive will be taxable. But, because you’ve already paid an extra amount to buy the security, you can get tax relief under the Accrued Income Scheme. The extra amount you’ve paid is an ‘accrued income loss’. You deduct this from the interest that you get.

https://www.gov.uk/government/publications/accrued-income-scheme-hs343-self-assessment-helpsheet/hs343-accrued-income-scheme-2019

Very helpful. Also important that you must declare accrued interest if you sell between coupon dates.

It would be interesting to know how much help people get via consolidated tax certificates from their investment provider for gilts.

iWeb shows accrued interest on the contract note, which is where it belongs. If your broker does not show the accrued interest, you can get it from Tradeweb.

Yes, it is on the contract note (also on ii) but a key purpose of a consolidated tax certificate is to help you fill in your self-assessment accurarately and fully. Does the iWeb CTC show accrued interest? (I have written to ii - watch this space for their reply.)

I am tempted to say "dream on". Including Excess Reportable income for on the consolidated tax certificate would be much more useful, but it never happens. You have to really dig for that.

stone_circle

masonic said:

Sign up for a free account at Tradeweb. This will give you accurate returns calculations based on the closing prices from the previous day.

https://reports.tradeweb.com/closing-prices/gilts/

This page no longer has yield info. Not sure if it's just a temporary technical problem. Anyone know of a good alternative?

TheGreenFrog

stone_circle said:

masonic said:

Sign up for a free account at Tradeweb. This will give you accurate returns calculations based on the closing prices from the previous day.

https://reports.tradeweb.com/closing-prices/gilts/

This page no longer has yield info. Not sure if it's just a temporary technical problem. Anyone know of a good alternative?

It doesn't work well at the week-end.  Should work fine after midday Monday.  yieldgimp.com will have info that may suit your needs although does not I think have official closing data like tradeweb