Tax treatment if selling a gilt at a profit

hallmark

A stupid question but something I've not considered before as it's not something I'd intend to do:

Lets say we're talking about T26 which matures on 30/01/2026

I understand that if somebody bought that during 2025 at say 96p they'd receive £1 on maturity and that return to par uplift is exempt from CGT or Income Tax.

However I'm not certain what would happen if they chose to sell now at 99.45.  IIUC that's not subject to CGT but would it be subject to income tax?

Thanks

wmb194

hallmark said:

A stupid question but something I've not considered before as it's not something I'd intend to do:

Lets say we're talking about T26 which matures on 30/01/2026

I understand that if somebody bought that during 2025 at say 96p they'd receive £1 on maturity and that return to par uplift is exempt from CGT or Income Tax.

However I'm not certain what would happen if they chose to sell now at 99.45.  IIUC that's not subject to CGT but would it be subject to income tax?

Thanks

No, the treatment is the same i.e. capital gains are exempt and you cannot offset losses against other taxable gains. It's not holding to maturity that matters, it's whether of not it's a "qualifying bond" and, as long as they have no rights to be converted into equity, most sterling denominated bonds are.

Any interest earned is subject to income tax.

DRS1

Just be aware that on your contract note you will see an amount for accrued income - that is the bit which will be subject to income tax (as well as any coupons actually received in the tax year)..

poseidon1

hallmark said:

A stupid question but something I've not considered before as it's not something I'd intend to do:

Lets say we're talking about T26 which matures on 30/01/2026

I understand that if somebody bought that during 2025 at say 96p they'd receive £1 on maturity and that return to par uplift is exempt from CGT or Income Tax.

However I'm not certain what would happen if they chose to sell now at 99.45.  IIUC that's not subject to CGT but would it be subject to income tax?

Thanks

Having regard to points made by other posters, is it entirely necessary for you to incur dealing costs and selling at a slightly lower 'bid' price with such a relatively short period to wait before an entirely cost free clean redemption will be in the offing?

Since this gilt only has a 0.125% yearly coupon, taxable accrued income on premature sale likely to be minimal.

hallmark

It's a bit up in the air at the moment, I might not need to but it might be necessary.