Not sure where to ask! Is there such a thing where a stock or bond will acrue in value to use capital gains allowance rather provide interest which will attract Income Tax? Where there is no or a minimum risk on return?

Check out "zero dividend preference shares", though I think they're not generally marketed to individuals. There are probably some gilts which pay nearly no income; if they're dated, they're guaranteed to be redeemed at par on their redemption date, so you can eliminate risk completely, unless the state collapses.

A number of reasons. I don't fully understand how they are priced[1] and it's not immediately obvious whether you will get your capital back or not at maturity. Typically I would expect you definitely would but, for example, it's not obvious to me that give me my money back in 2009 AFAICT there is only a very limited set of maturities available. AIUI, the OP is looking for a low to no risk way of getting capital gains (presumably to use up his CGT allowance). To get that low risk he has to hold the gilts to maturity AFAICT All of the short term (

Capital stock or bond?

Feb 05, 2008 25 Replies

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google 18 years ago

A number of reasons.

I don't fully understand how they are priced[1] and it's not immediately obvious whether you will get your capital back or not at maturity. Typically I would expect you definitely would but, for example, it's not obvious to me that

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give me my money back in 2009 AFAICT there is only a very limited set of maturities available.

AIUI, the OP is looking for a low to no risk way of getting capital gains (presumably to use up his CGT allowance). To get that low risk he has to hold the gilts to maturity

AFAICT All of the short term (

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RobertL 18 years ago

Do you mean that the index-lining part is taxed as a capital gain? Surely it is treated as interest and taxed as income, it's just that the rate is calculated based on the RPI.

Robert

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google 18 years ago

Both the coupon and the face are index linked.

I would assume[1] the coupon would be treated as income and the face (redemption) as capital gain.

Tim.

[1] But my assumptions were wrong further up this thread wrt strips so take this with a big pinch of salt.

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Terry Harper 18 years ago

Gilts are not subject to CGT in any case. The income is that which is paid as interest. The capital is what gets paid back at redemption, or when sold.

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Tim 18 years ago

"Terry Harper" wrote

Has that always been the case?

Of course, if you bought at par and sold/redeemed at par, then there would be no gain and so no CGT anyway. But that's unlikely for an IL gilt, isn't it (and not necessarily true for normal gilts either) ?

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Terry Harper 18 years ago

See

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Certain other assets do not give rise to a chargeable gain when you dispose of them, including .. your private car .. personal effects and goods worth £6,000 or less (see Help Sheet IR293: Chattels and Capital Gains Tax.) .. cash held in sterling .. foreign currency held for your (or your family's) personal use .. Savings Certificates, Premium Bonds and British Savings Bonds .. UK Government stocks (gilts) ..

Don't forget that normal gilts can be at a considerable discount to par when interest rates are high. Currently 4.25% T32 is standing at

97.59 and is likely to rise when interest rates fall.

See

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'565112&reportpage=Gilts/Daily_Prices Also the undated stocks can be at a very big discount to par value,

2.5% Consols being currently at 55.49 and again could rise considerably.

TTBOMK UK Gilts have always been exempt from CGT.

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