Can I avoid interest payments by selling my Gilt ETF before the Reporting Date and re-buying?

NewLandlord

Hi

For tax reasons I would like to minimize interest owed during the tax year 2027/28 (EDITED - I originally wrote 2026/27), but I still wish to hold a Gilts ETF.

Am I correct in thinking that if I was to sell my accumulating GTLA ETF (Invesco Markets Gilts) just before the last day of the reporting period (31 December 2026) and re-buy just after, then I would not owe any interest (from the Excess Reportable Income) to HMRC?

And moreover, if I rebuy the same GLTA ETF within 30 days this would not count as a disposal for CGT purposes? Also, for ease of keeping track of average unit prices for CGT, would it be best to buy exactly the same number of shares that I sold?

Many thanks!

EDIT:
Sadly, it appears that this idea does not work as HMRC rules mean that you are always on the hook for either income or CGT tax. Please see the posts by spider and masonic in this thread.

masonic

That is correct. If you don't own any shares on the last day of the reporting period, then there will be no ERI liability.

Bed & Breakfast rules would mean that your disposal would be matched to your re-acquisition if within 30 days, which would result in your capital gain being very low (or possibly negative). The calculations would be simpler if you bought at least the same number of shares as you sold.

However, I've just done a quick check and the fund distribution date for the ERI is 30th June, so it would be in the following tax year that you'd have the liability. That means you need to have not held the shares on 31st December 2025 in order to avoid ERI in the 2026/27 tax year, as the ERI at the end of the 2025 reporting period will be treated as being received on 30th June 2026.

NewLandlord

Thank you so much for your reply.

I really appreciate that you also pointed out this idea does not apply for the coming tax year 2026/27 but the one after. Luckily the 2027/28 Tax Year is the one I was worried about. I will edit my original post to make this clear. Again, many thanks for taking the time to answer this so comprehensively.

spider42

I'm afraid this idea doesn't work. If the sale is matched with an acquisition in the following reporting period for CGT purposes (i.e. if the 30 day bed and breakfasting rule applies), then you are still treated as owning the holding at the end of the reporting period.

See https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm13222 (penultimate paragraph).

You would need to delay the repurchase for more than 30 days to avoid the excess reportable income charge. Alternatively, if you don't wish to be out of the market that long, you could acquire a different, but similar, ETF instead.

spider42

Sorry, I've posted the link for guidance to corporate holders. But the same rules applies to individual holders too. Correct link is: https://www.gov.uk/hmrc-internal-manuals/investment-funds/ifm13326

masonic

https://forums.moneysavingexpert.com/discussion/comment/81933596#Comment_81933596

Ah, so it is this part that kills the immediate reacquisition part:

"If a participant disposes of an interest in a reporting period and S106A TCGA 1992 (Identification of securities: capital gains tax) applies to identify the whole or part of that interest with an interest acquired in the next reporting period, then the disposal is ignored and the participant is treated as having held that interest at the end of the earlier period (regulation 94(3A))."

Which means one must have either CGT or income tax consequences, but one could switch back and forth between a pair of similar accumulating ETFs to remain in the market and avoid the income.

NewLandlord

Thank you all for the feedback spider and masonic.

Unsuprisingly, I guess I am not the first person to have wondered about this idea, as paying CGT in the future is almost invariably better than being taxed on interest income now.