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Matthew purchased £200,000 (nominal value) gilts, paying interest at 1%, for £211,000 on 1 September 2018. Interest is payable half yearly on 30 June and 31 December.
He sold the gilts on 1 December 2019 for £213,000 (including accrued interest).How much will Matthew include in savings income in respect of the gilts in the tax year 2019/20?
answer: Interest received 30 June 2019 (£200,000 × 1% × 6/12)
Interest accrued (1 July 2019 ? 30 November 2019) (£200,000 × 1% × 5/12)sir i don’t understand why we consider first 3months interest received(1jan19-5april19) when it must have been included in tax year 2018/19?
The basis of assessment is RECEIVED not accruals – but look at the study notes chapter 2 section 3.3 page 8 to see how the accrued income scheme works when a security is sold shortly before the interest was due to be paid
Hi Agness,
Can I input here.Is the answer to the question £ 1,833?
If so you calculate as below:
Interest actually rec’d:
1st time 30 June 2019 (200,000 x 1% x 6/12)= 1000
2n time when he sold the gilt the interest for 5 months was included in the sale price.
In the old times, it was the clever way to avoid taxation, HRMC was a bit “blind” until they figured out, that there is a interest hidden in capital gain (which is btw tax free in this case). any how you calc the interest 200,000 x1%x 5/12 = 833
in total = 1,833
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