Gilts to avoid tax on onterest.

olbas_oil

Looking at the "How gilts can help you pay less tax on savings interest' guide.  I notice the UK Treasury Strip 7/12/27 which has a coupon of 0%. I can't put that in the box (positive figures only) but it suggests that this would be equivalent to a return of 14%.
How is that taxed?

Apologies for this heavily edited post! I now realise that I don't understand the guide at all!

DRS1

You want a low coupon gilt not a gilt strip.

poseidon1

olbas_oil said:

Looking at the "How gilts can help you pay less tax on savings interest' guide.  I notice the UK Treasury Strip 7/12/27 which has a coupon of 0%. I can't put that in the box (positive figures only) but it suggests that this would be equivalent to a return of 14%.
How is that taxed?

Apologies for this heavily edited post! I now realise that I don't understand the guide at all!

Assuming you are referring to the Treasury Strip identfied with the LSE ticker BA82 , sounds like you have made the same rookie error as the questioner in the following reddit thread -

https://www.reddit.com/r/UKInvesting/comments/1lu7xka/uk_gilts_strip_return_much_higher_regular_gilts/

As indicated in the thread this particular Strip is not available to trade by retail investors, was  intially issued in 2004 and  seems last trade per LSE was January 2025. 

Furthermore, Strips are deeply discounted securities where the return on redemption although CGT free is liable to income tax on any 'gain'. The link to the MSE explanatory article you provided does not (wisely) mention Strips so not clear how or why you stumbled on this particular one.


Strips which are now being issued by DMO  for investment by retail investors tend to have short durations of between 3 months to a year, and the returns are closely aligned with prevailing Bank of England base rates.

These shorted dated Strips  are not particularly noteworthy, and should only be purchased via ISAs and SIPPs to avoid income tax on eventual redemption.

aroominyork

So if you want a low coupon gilt to late 2027/early 2028, look at TN28 on this website, which is currently paying 3.599% pa yield to maturity. Not quite 14%...

Futuristic

aroominyork said:

So if you want a low coupon gilt to late 2027/early 2028, look at TN28 on this website, which is currently paying 3.599% pa yield to maturity. Not quite 14%...

Also check out https://giltsyield.com/bond/ I switched from yieldgimp and its free port tracker