Gilts

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Gilts
  • Is the savings income taxable?
  • FOTRA securities
  • Taxable income
  • Accrued income scheme
  • Interest from overseas bonds
  • Interaction with capital gains tax

‘Gilts’ are securities that are also known by a number of different names (eg gilt-edged securities, Government securities or treasury stock).

The Government sells gilts to fund the deficit between public spending and tax receipts. Normally, the Government pays interest to the holder of the gilt and the interest rate varies considerably depending on the issue. The rate can be fixed or linked to the retail prices index.

Interest on gilts bought on or after 6 April 1998 is payable gross (unless an application is made by the holder to the Bank of England for net payment).

Interest from gilts is savings income for the purposes of the income tax calculation, and so the savings income tax rates apply, including the starting rate for savings and the savings nil rate band. See the Taxation of savings income guidance note. However, gilt interest is reportable in boxes 1 to 3 on page Ai1 of the additional information supplementary pages rather than on the main tax return.

Gilts are a popular way of funding future known commitments, such as school fees. They have the added advantage of being fully-guaranteed by the Government (whereas only the first £85,000 of bank savings per institution is reimbursed under the financial services compensation scheme). The low-risk nature of gilts means they are popular investments for people approaching retirement age. However, to give advice to a client on his investment strategy, the adviser must be authorised to give investment advice by the Financial Conduct Authority. See the Regulated investment advice guidance note.

Other interest reportable in boxes 1 to 3 on page Ai1 of the additional information supplementary pages includes income from bonds, loan notes (also known as loan stock) or similar securities issued by UK companies, local authorities or bodies in the UK.

Is the savings income taxable?

Whether this savings income is taxable in the UK depends on the circumstances of the individual and whether the income is paid by a UK resident payer

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