Money markets

Notepad_Phil

Pat38493 said:

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These could become even more popular given that the current talk about reducing the annual ISA limit for cash ISA, seems to assume that nobody has ever heard of short term money market funds in the S&S ISA.
...

My understanding is that back in the day a S&S ISA was not allowed to hold funds etc that paid interest. Whether that Is true or not, it seems likely to me that a quick change to what's allowed in a S&S ISA could easily restrict their use if anyone thought that necessary.

dont_use_vistaprint

QrizB said:

LHW99 said:

dont_use_vistaprint said:

MetaPhysical said:

They're good to park cash into in an ISA or SIPP for diversification rather than just leaving it in real cash as a balance in your account.  Still carries a small risk though.   Also they're no good for a GIA though if you have to pay 40/45% tax.  That's where low coupon gilts come into their own.

Or treasury bills that pay zero coupon are even better 

How would you buy those in the UK? (genuine question)

US Treasury bills would not get the CGT benefits that gilts receive.

I think the closest UK equivalent would be "Treasury strip" but they aren't treated quite like gilts either? See:

https://forums.moneysavingexpert.com/discussion/6423301/treasury-strip

No there are UK Treasury bills auctioned  by the government periodically to fund investment in infrastructure projects they pay zero coupon and 4 to 5% growth,I.e they sell back at 100p typically an auction sell for 96p , popular with highest rate tax payers and those exempt from CGT.


from AI:

UK Treasury bills are short-term, zero-coupon debt instruments issued by the UK government to finance its operations. Investors purchase them at a discount, and the profit comes from the difference between the purchase price and the face value received at maturity, which is typically a few months. They are considered very low-risk due to the government backing and are considered highly liquid

QrizB

dont_use_vistaprint said:

QrizB said:

LHW99 said:

dont_use_vistaprint said:

MetaPhysical said:

They're good to park cash into in an ISA or SIPP for diversification rather than just leaving it in real cash as a balance in your account.  Still carries a small risk though.   Also they're no good for a GIA though if you have to pay 40/45% tax.  That's where low coupon gilts come into their own.

Or treasury bills that pay zero coupon are even better 

How would you buy those in the UK? (genuine question)

US Treasury bills would not get the CGT benefits that gilts receive.

I think the closest UK equivalent would be "Treasury strip" but they aren't treated quite like gilts either? See:

https://forums.moneysavingexpert.com/discussion/6423301/treasury-strip

No there are UK Treasury bills auctioned  by the government periodically to fund investment in infrastructure projects they pay zero coupon and 4 to 5% growth,I.e they sell back at 100p typically an auction sell for 96p , popular with highest rate tax payers and those exempt from CGT.
from AI:

From II (more trustworthy than AI):

https://www.ii.co.uk/analysis-commentary/gilts-or-uk-treasury-bills-which-should-you-choose-ii531451

This means that any gains from UK Treasury Bills are taxed as income, rather than capital gains. This differs to gilts, where capital gains are tax-free but coupons are taxed as income. 

So, rather like Treasury strip, if held in a GIA you'll be paying income tax on any gains.

What advantage were you thinking UK Treasury bills to offer that makes them even better than low-coupon gilts? And why would they be popular with highest rate taxpayers and those exempt from CGT?