Should I defer taking my state pension until after financial year 2024 ends?

EthicsGradient

nottsphil said:

EthicsGradient said:

nottsphil said:

zagfles said:

nottsphil said:

zagfles said:

nottsphil said:

zagfles said:

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds). 

How reliable is the gain on these? How much would any buying or selling fees eat into an investment of say £25,000?

The gain will be 100% reliable if held to maturity (as long at the govt doesn't default on its debt!). If you hold to maturity you just buy, you don't sell, it just matures. 

So for instance if you buy the T26 gilt Treasury 0.125% 30/01/2026 Share Price (T26) Gilt | T26 (hl.co.uk)
which matures 30/1/26, the buy price is 93.95, but IME on 

Overall, works out to about 4.1% AER after tax and charges. So that's equivalent to a savings account paying over 5% interest if you have to pay basic rate tax on your interest. 

Thanks for composing that whole post, it taught me so much that I don't need to explore Xylophone's links (I'm presuming IME refers to 'in my estimation' and not the bank 😀). This is because I can get 5.06% apr with Vanquis over two years (5.21 over a year) also guaranteed, for less hassle (I'm a lower-end basic rate taxpayer).  
Are there any shares/funds I could buy to sell before 6.4.25 and utilise my capital gains allowance (wasted every year this century)? Happy to take low/no dividends if c.5% capital growth is almost certain.
The idea is that I'd have less capital earning interest taxable at 20% . I still have £15,000 of this year's ISA to utilise. 

You're not going to get shares that guarantee 5% growth, they'll be subject to whims of the stockmarket and can rise or fall. Short dated low coupon gilts or bonds might do the trick but with bonds you take the risk of the company going bust. 

IME is "in my experience". I think the buy price is the worst price you'd get if you tried to buy at that time - when trading online you get a box up with a price and cost and you have something like 15 seconds to accept or reject it, and the price I've been quoted has always been better than the buy price so I've always accepted. 

zagfles said:

nottsphil said:

zagfles said:

nottsphil said:

zagfles said:

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds). 

How reliable is the gain on these? How much would any buying or selling fees eat into an investment of say £25,000?

The gain will be 100% reliable if held to maturity (as long at the govt doesn't default on its debt!). If you hold to maturity you just buy, you don't sell, it just matures. 

So for instance if you buy the T26 gilt Treasury 0.125% 30/01/2026 Share Price (T26) Gilt | T26 (hl.co.uk)
which matures 30/1/26, the buy price is 93.95, but IME on 

Overall, works out to about 4.1% AER after tax and charges. So that's equivalent to a savings account paying over 5% interest if you have to pay basic rate tax on your interest. 

Thanks for composing that whole post, it taught me so much that I don't need to explore Xylophone's links (I'm presuming IME refers to 'in my estimation' and not the bank 😀). This is because I can get 5.06% apr with Vanquis over two years (5.21 over a year) also guaranteed, for less hassle (I'm a lower-end basic rate taxpayer).  
Are there any shares/funds I could buy to sell before 6.4.25 and utilise my capital gains allowance (wasted every year this century)? Happy to take low/no dividends if c.5% capital growth is almost certain.
The idea is that I'd have less capital earning interest taxable at 20% . I still have £15,000 of this year's ISA to utilise. 

You're not going to get shares that guarantee 5% growth, they'll be subject to whims of the stockmarket and can rise or fall. Short dated low coupon gilts or bonds might do the trick but with bonds you take the risk of the company going bust. 

IME is "in my experience". I think the buy price is the worst price you'd get if you tried to buy at that time - when trading online you get a box up with a price and cost and you have something like 15 seconds to accept or reject it, and the price I've been quoted has always been better than the buy price so I've always accepted. 

What 'time' are you referring to when buying? ( I have no experience of financial trading apart from buying shares at denationalisations).

I like the concept of these coupon gilts because they're Government guaranteed and you know when buying exactly what your capital gain and interest will be. I think I've delayed eventual dementia by a few days by working out the price I'd need to pay to get the same (annual equivalent) interest rate as the Vanquis one year fixed, but without the tax.
 Say tomorrow I bought 80,000 one pound ¼% Treasury Gilts that mature on Friday 4th April 2025 for (an ambitious) 96.25p each. (I'm presuming the interest rate was fixed during the ultra_low period). I'd get both coupons, yielding £200 which would be subject to 20% tax as no different from interest. Added to the capital gain of £3000 (3.75p x 80,000) would mean the original £77,000 investment has yielded £3160 over just 287 days. Scaling this up to a year for comparison with the Vanquis fixed term, 365 /287 x £3160 = £4018.81 which is 5.219% of £77,000, tax paid. Any constructive comments or criticisms will be welcomed!

With gilts there is the added complication of 'clean' and 'dirty' prices, which evens out the variation in price you might expect over the 6 months between when the coupons are due. With low coupons, the difference is small, but for a true figure it ought to be taken into account, and a proper explanation needs to come from someone who can explain better than me.

For your calculation, the concept looks basically OK (not that I can see a ¼% gilt maturing in April). There is a spreadsheet function XIRR which works out an equivalent rate for you - this takes account of you getting one coupon 6 months before maturity. For your scenario, it shows

21/06/24 -77000

04/10/24 80

04/04/25 80

04/04/25 80000

5.252%
For the actual TN25 gilt, and that price above (with, say, a £4 trading fee in the purchase, I think it'd be, without the clean/dirty adjustment,

21/06/24 -78120.80

31/07/24 80

31/01/25 80

31/01/25 80000

4.292%

Looks like I've miscounted my number of days because 285÷287 × your 5.252 = 5.215%.
The percentage for the real(istic) buy price is disappointing as it equates to 5.365% for the basic rate taxpayer, a figure which could conceivably be beaten by a challenger bank or loyalty offer following the BBR decision akin to Nationwide's 5.5% pa for 18 months.

If you refer to nothing more than the equivalent of a share decreasing slightly in value ex-(small) dividend, then no further explanation is required  (apart from the 'dirty' terminology!)

It is the equivalent, but the way it's shown for gilts can be quite confusing - see eg https://forums.moneysavingexpert.com/discussion/6505439/question-when-buying-an-indvidual-gilt-tr25

On AJ Bell, the investor asked to buy £10,000 of TR25 (5% coupon, so 2.5% paid each 6 months), priced at £1.0026 - on 12 February, and the next coupon would be paid on 7th March. They actually had to pay £10,227.78, because that includes most of the coupon payment that has built up before 7th March (if you look at Gilt Yields (yieldgimp.com) it shows "accrued days" and "accrued interest" to indicate how much this is on a given day).

Yes, for a basic rate taxpayer, the advantage of buying short term low coupon gilts can be minimal - it helps higher rate payers a lot more.

HUMBUG

zagfles said:

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

But maybe you should do! Paying tax on savings interest is easily avoided, or minimised, eg using ISAs, premium bonds, and when those are filled, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds). 

I do use ISA's but found Premium Bonds paid out less than if I had put the the money in a moderately good savings account (ie. Non ISA).    Must admit that I've never heard of low coupon gilts before but well worth me investigating now that my starting savings rate will be zero. 

nottsphil

EthicsGradient said:

nottsphil said:

zagfles said:

nottsphil said:

zagfles said:

nottsphil said:

zagfles said:

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds). 

How reliable is the gain on these? How much would any buying or selling fees eat into an investment of say £25,000?

The gain will be 100% reliable if held to maturity (as long at the govt doesn't default on its debt!). If you hold to maturity you just buy, you don't sell, it just matures. 

So for instance if you buy the T26 gilt Treasury 0.125% 30/01/2026 Share Price (T26) Gilt | T26 (hl.co.uk)
which matures 30/1/26, the buy price is 93.95, but IME on 

Overall, works out to about 4.1% AER after tax and charges. So that's equivalent to a savings account paying over 5% interest if you have to pay basic rate tax on your interest. 

Thanks for composing that whole post, it taught me so much that I don't need to explore Xylophone's links (I'm presuming IME refers to 'in my estimation' and not the bank 😀). This is because I can get 5.06% apr with Vanquis over two years (5.21 over a year) also guaranteed, for less hassle (I'm a lower-end basic rate taxpayer).  
Are there any shares/funds I could buy to sell before 6.4.25 and utilise my capital gains allowance (wasted every year this century)? Happy to take low/no dividends if c.5% capital growth is almost certain.
The idea is that I'd have less capital earning interest taxable at 20% . I still have £15,000 of this year's ISA to utilise. 

You're not going to get shares that guarantee 5% growth, they'll be subject to whims of the stockmarket and can rise or fall. Short dated low coupon gilts or bonds might do the trick but with bonds you take the risk of the company going bust. 

IME is "in my experience". I think the buy price is the worst price you'd get if you tried to buy at that time - when trading online you get a box up with a price and cost and you have something like 15 seconds to accept or reject it, and the price I've been quoted has always been better than the buy price so I've always accepted. 

zagfles said:

nottsphil said:

zagfles said:

nottsphil said:

zagfles said:

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds). 

How reliable is the gain on these? How much would any buying or selling fees eat into an investment of say £25,000?

The gain will be 100% reliable if held to maturity (as long at the govt doesn't default on its debt!). If you hold to maturity you just buy, you don't sell, it just matures. 

So for instance if you buy the T26 gilt Treasury 0.125% 30/01/2026 Share Price (T26) Gilt | T26 (hl.co.uk)
which matures 30/1/26, the buy price is 93.95, but IME on 

Overall, works out to about 4.1% AER after tax and charges. So that's equivalent to a savings account paying over 5% interest if you have to pay basic rate tax on your interest. 

Thanks for composing that whole post, it taught me so much that I don't need to explore Xylophone's links (I'm presuming IME refers to 'in my estimation' and not the bank 😀). This is because I can get 5.06% apr with Vanquis over two years (5.21 over a year) also guaranteed, for less hassle (I'm a lower-end basic rate taxpayer).  
Are there any shares/funds I could buy to sell before 6.4.25 and utilise my capital gains allowance (wasted every year this century)? Happy to take low/no dividends if c.5% capital growth is almost certain.
The idea is that I'd have less capital earning interest taxable at 20% . I still have £15,000 of this year's ISA to utilise. 

You're not going to get shares that guarantee 5% growth, they'll be subject to whims of the stockmarket and can rise or fall. Short dated low coupon gilts or bonds might do the trick but with bonds you take the risk of the company going bust. 

IME is "in my experience". I think the buy price is the worst price you'd get if you tried to buy at that time - when trading online you get a box up with a price and cost and you have something like 15 seconds to accept or reject it, and the price I've been quoted has always been better than the buy price so I've always accepted. 

What 'time' are you referring to when buying? ( I have no experience of financial trading apart from buying shares at denationalisations).

I like the concept of these coupon gilts because they're Government guaranteed and you know when buying exactly what your capital gain and interest will be. I think I've delayed eventual dementia by a few days by working out the price I'd need to pay to get the same (annual equivalent) interest rate as the Vanquis one year fixed, but without the tax.
 Say tomorrow I bought 80,000 one pound ¼% Treasury Gilts that mature on Friday 4th April 2025 for (an ambitious) 96.25p each. (I'm presuming the interest rate was fixed during the ultra_low period). I'd get both coupons, yielding £200 which would be subject to 20% tax as no different from interest. Added to the capital gain of £3000 (3.75p x 80,000) would mean the original £77,000 investment has yielded £3160 over just 287 days. Scaling this up to a year for comparison with the Vanquis fixed term, 365 /287 x £3160 = £4018.81 which is 5.219% of £77,000, tax paid. Any constructive comments or criticisms will be welcomed!

Using an online broker like ii, HL or AJ Bell, they give a rough price you can buy at, based on the recent market, and when you've typed in how many you want to buy, you click on a button to get a current quote for that amount. They'll give an exact price you can buy that amount at, and you have 15 seconds to accept it, or reject it. So, for instance, the TN25 (¼% 31/1/25) gilt was shown at the rough price of £0.9773, and when I started the process to buy 1000, the exact price I was offered was £0.97646.

With gilts there is the added complication of 'clean' and 'dirty' prices, which evens out the variation in price you might expect over the 6 months between when the coupons are due. With low coupons, the difference is small, but for a true figure it ought to be taken into account, and a proper explanation needs to come from someone who can explain better than me.

For your calculation, the concept looks basically OK (not that I can see a ¼% gilt maturing in April). There is a spreadsheet function XIRR which works out an equivalent rate for you - this takes account of you getting one coupon 6 months before maturity. For your scenario, it shows

21/06/24 -77000

04/10/24 80

04/04/25 80

04/04/25 80000

5.252%
For the actual TN25 gilt, and that price above (with, say, a £4 trading fee in the purchase, I think it'd be, without the clean/dirty adjustment,

21/06/24 -78120.80

31/07/24 80

31/01/25 80

31/01/25 80000

4.292%

The fact that your gilt matures 9 weeks before the tax year ends causes an inefficiency in that the buy price is going to be more expensive than if it matured later, thus reducing the capital gain to £1879. But I've just had a thought - might I be able to find a very short guilt after this one matures to 'make up' the £3K allowance?

zagfles

There's no CGT on raw gilts. 

nottsphil

HUMBUG said:

zagfles said:

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

But maybe you should do! Paying tax on savings interest is easily avoided, or minimised, eg using ISAs, premium bonds, and when those are filled, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds). 

 Must admit that I've never heard of low coupon gilts before but well worth me investigating now that my starting savings rate will be zero. 

I'm pleased about that because it means I can't be accused of derailing the thread 😊

I've lost the ability to multiquote, so you said

"I have been putting in £2880  into a SIPP every year since I took early retirement from my previous job."
Don't you get tax relief on that? Even if you don't, why doesn't it appear in your calculation? It's not as if you'll get tax relief on what it pays out!

HUMBUG

nottsphil said:

HUMBUG said:

zagfles said:

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

But maybe you should do! Paying tax on savings interest is easily avoided, or minimised, eg using ISAs, premium bonds, and when those are filled, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds). 

 Must admit that I've never heard of low coupon gilts before but well worth me investigating now that my starting savings rate will be zero. 

I'm pleased about that because it means I can't be accused of derailing the thread 😊

I've lost the ability to multiquote, so you said

"I have been putting in £2880  into a SIPP every year since I took early retirement from my previous job."
Don't you get tax relief on that? Even if you don't, why doesn't it appear in your calculation? It's not as if you'll get tax relief on what it pays out!

I don't withdraw any income from my SIPP which is why it's not included in my calculation. After HMRC add their 20%  I normally transfer the SIPP into a SIPP Drawdown but then take 25% of it tax-free.