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Hello Tutor,
I have a question regarding the UK Government securities (gilts)
“On 1 January 2024, Anna bought government bonds for £50,000 with a face value of £40,000.
The bonds paid interest at an annual rate of 3%, calculated on the face value and paid twice a year on 30 June and 31 December.
She sold the bonds on 31 March 2024 for £50,300, with the price including interest earned up to that date.”From this, we can calculate the accrued saving income of £300 = £(40,000 * 3/12 * 0,03), which is equal to the difference between the selling price and the purchase price.
My question is in case the selling price is different, say £55,300, how can we account for the income of the increase in price – £(55,000 – 50,000) = £5,000? Should it be in non-saving income or saving income when calculating taxable income?
Thank you in advance!
The difference between the selling price and the purchase price, in the context that you use it, is irrelevant.
For 2024/25 you are correct that under the accrued income scheme, she would be taxed on interest of £300, so the CAPITAL proceeds on sale is £50,000, which means that there was no increase in value between purchase and sale.
If the selling price had been £55,000, the increase in value between purchase and sale (the gain on disposal) would be £5,000, which falls under the CGT rules, but government stock is exempt from CGT for individuals so this would be ignored for tax.
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