CGT for Gilts

valiant24

I'm quite partial to holding short-term Gilts to maturity, having been severely burned by Gilt ETFs in 2022.

On Friday I bought some both for my company, and in my dealing account.   Unfortunately on the latter I had a brain-fade and bought a high- rather than low-coupon one.   Usually I buy low-coupon when not buying through my company or in my SIPP or ISA, because there's no CGT on maturing gilts and most of the profit from a low-coupon gilt comes via the capital gain.

Now my question is: if I wait until shortly before dividend day and sell the gilt having never collected the dividend, hopefully at a profit because all else being equal it will be being sold with more days' accrued interest, is that gain also CGT free?

Thanks
V

GeoffTF

Accrued interest is explained here:

https://www.gov.uk/government/publications/accrued-income-scheme-hs343-self-assessment-helpsheet/hs343-accrued-income-scheme-2022

zagfles

There's no CGT but you still pay tax on the interest accrued. Look at your contract note when you bought. There'll be an amount of accrued interest added to the cost. When you sell you get the accrued interest paid on top of the clean price. The accrued interest counts as income not capital gain. If no coupon has actually been paid the interest would be the accrued received on sale minus the accrued interest paid on purchase. There are some foibles and exceptions, see HS343 Accrued Income Scheme (2022) - GOV.UK 

aroominyork

So limit the damage by selling it asap and buying the low coupon gilt.

valiant24

zagfles said:

There's no CGT but you still pay tax on the interest accrued. Look at your contract note when you bought. There'll be an amount of accrued interest added to the cost. When you sell you get the accrued interest paid on top of the clean price. The accrued interest counts as income not capital gain. If no coupon has actually been paid the interest would be the accrued received on sale minus the accrued interest paid on purchase. There are some foibles and exceptions, see HS343 Accrued Income Scheme (2022) - GOV.UK 

Thank you, that makes perfect sense.

valiant24

aroominyork said:

So limit the damage by selling it asap and buying the low coupon gilt.

Yes, will get to it in the morning, thanks.