UK STRIPS - how to calculate the correct price / return

DoctorStrange

I've seen a UK STRIP priced at £92.80 and maturing in March next year. To my novice eye, this would appear to offer an 7.2% return in under a year, which I appreciate can't be correct. The website says: 

Index linked gilts are bought and sold at an 'inflation adjusted price'. If you own an index linked gilt issued after 2005 you won't be able to see a price adjusted for inflation, so the prices shown might not reflect the true value. 

I'd be grateful for any help in clarifying why I can't for example purchase £100k nominal for £92,800 then receive £100k back at maturity.

Also, any help to work out what the actual price might be would be appreciated

Thanks

masonic

Was it either of the bottom two in this table? (pricing is at close 12/04/2024)

DoctorStrange

Yes, the last one there (GB0030884786) - may I ask which platform you're used to get this info? Seems exactly what I'm looking for.

Johnjdc

Strips are taxable by the way, just FYI. If your reason for buying strip rather than a regular gilt is to convert your gain to capital, it doesn't work.

masonic

DoctorStrange said:

Yes, the last one there (GB0030884786) - may I ask which platform you're used to get this info? Seems exactly what I'm looking for.

The site is Tradeweb. You can sign up for a free account at https://reports.tradeweb.com/account/login/

DoctorStrange

Thanks to you both - much appreciated!

DoctorStrange

Johnjdc said:

Strips are taxable by the way, just FYI. If your reason for buying strip rather than a regular gilt is to convert your gain to capital, it doesn't work.

@Johnjdc

Thanks for this pointer - hadn't appreciated that. 

Are there any other pitfalls I should look out for? Does this one qualify as a 'conventional' gilt and thus exempt from CGT?

Treasury 0.625% 07/06/25 (BK5CVX0)

Thanks again, really appreciate your time

Johnjdc

Yeah, low coupon is fine, and the indexation element is always tax free. Zero coupon (if artificially achieved via strip - the government could in theory issue 0% though in reality I don't think has ever gone below 0.125%) is not.