bonds / gilts

dannybbb

@InvesterJones thanks - any advice on how to pick one?

DRS1

The yieldgimp site linked above is very useful for picking what you want.  IT may be better to wait for a weekday when the list of gilts actually shows up - well I can't read it at weekends as everything is greyed out.

Newbie_John

Based on example, if I buy T27A worth of £10k, assuming I'm 40% tax payer who maxed out on £500 free - I will be getting £210 every 6 months in coupons (subject to 40% tax) and then at the end of January 2027 my £10k could be worth close to £10k either up or down? and that difference is down to CGT ?

masonic

dannybbb said:

@masonic but wouldnt i pay tax on income from gilts? im trying to understand the difference  / the rate of return after tax so i can establish where to invest

Yes you would. In the example I gave (TG30), the coupon is 0.375%, so you'd pay 20% tax on that (0.075%), but the gross redemption yield is 4.15% and 4.15% minus 0.075% is still above 4%.

dannybbb

@Newbie_John doesnt sound good when you put it like that

masonic

Newbie_John said:

Based on example, if I buy T27A worth of £10k, assuming I'm 40% tax payer who maxed out on £500 free - I will be getting £21 every 6 months in coupons (subject to 40% tax) and then at the end of January 2027 my £10k could be worth close to £10k either up or down? and that difference is down to CGT ?

T27A is a bad option if you are looking for a low coupon gilt. Its coupon is 4.125%, which means almost all of its return is taxable. Look for one with a coupon lower than 1%. There are plenty to choose from.

dannybbb

@DRS1https://www.yieldgimp.com/ but on this list for example anm i missing anything if I was to look at the amount of time I wanted to lock away the money and he best net rate for that duration?

masonic

dannybbb said:

@DRS1https://www.yieldgimp.com/ but on this list for example anm i missing anything if I was to look at the amount of time I wanted to lock away the money and he best net rate for that duration?

Look at the details column. This contains the maturity date on the right, and the coupon to the left of that. You want a low coupon because that's the part that is taxable. Calculate 20% of that number as "TAX". Then check the "Redemption yields" column. Take the gross figure as "GROSS". Then you can calculate "NET" = "GROSS" - "TAX". This will give you the ballpark return after tax.

DRS1

Newbie_John said:

Based on example, if I buy T27A worth of £10k, assuming I'm 40% tax payer who maxed out on £500 free - I will be getting £21 every 6 months in coupons (subject to 40% tax) and then at the end of January 2027 my £10k could be worth close to £10k either up or down? and that difference is down to CGT ?

T27A seems like a bad choice for a 40% taxpayer.  TN28 would be better.

But assuming the price you pay was 99.82 per T27A gilt - so 10K worth for £9982.  The gain on maturity would be £18 and that would be free of CGT.  Of course I have ignored commission and accrued interest in the 9982.

kempiejon

Newbie_John said:

Based on example, if I buy T27A worth of £10k, assuming I'm 40% tax payer who maxed out on £500 free - I will be getting £21 every 6 months in coupons (subject to 40% tax) and then at the end of January 2027 my £10k could be worth close to £10k either up or down? and that difference is down to CGT ?

https://www.yieldgimp.com/

T27A 4.125% 29/01/2027. 99.82.
For a 40% tax pay who has used their £500 this is no favourite. No better really than cash.
You buy one gilt for 99.82p and it redeems at £1, that bit is tax free. it pays 4.125p per year taxed.

TN28 0.125% 31/01/2028 89.63
You buy one gilt for 89p it reddems at £1. Gain, 11p is tax free. 0.125p coupon per year is taxed.

Price (clean/dirty), coupon, accrued interest, redemtion date. capital gains, income and their taxation treatment are the variables I needed to grasp.
if the moneysaving guide linked didn't cover all the questions try moneyvator
https://monevator.com/reduce-tax-on-savings-with-gilts/https://www.moneysavingexpert.com/savings/uk-gilts-lower-tax-savings/ paywalled
perhaps https://monevator.com/gilts-uk-government-bonds/