Tax Treatment

The interest earned on gilt-edged stocks is, of course, taxable income in the hands of the stockholder.


In practice the interest payments are made by the Bank of England, the registrar for most stocks, net of tax at the basic rate of income tax, so the stockholder, unless he is liable to higher rates of income tax or to the investment income surcharge, is not liable to pay any further tax on it.


Thus a holder of £1,500 nominal of 81/a % stock will receive each half-year an interest warrant for £44.60 net, representing a gross payment of £63.75 (4.25% of £1,500) less tax at 30%. Click here for business advice.

A very small number of specified stocks (e.g. 31/2% War Stock) are paid gross, but in the hand of a UK resident this income is taxable.


National Savings Register

Most popular government stocks can be bought and sold in small quantities on the National Savings Register, which is a subsidiary register to the Bank of England.


An attraction is that interest payments are made without deduction of income tax - a useful feature for a person whose income is not taxable. Find out more.


Dealing costs are lower than are those attaching to transactions through a stockbroker where the Bank of England main register is used, but prices are less keen.


Struggling with your tax forms?


There are many things an accountant can do to help you master this job. When filling out your tax form, it is vital that all information you have given is correct and that it is given in on time, otherwise your company may be faced with a fine. See more about tax advisors.


A tax accountant can work with you throughout the year to offer advice to help you manage your business in a way that gives you the biggest tax advantages.

Accrued Interest

Another reason for the disparity between the yields on stocks that ought, on the face of things, to be identical, is concerned with the due date of the interest that is paid on the holdings. As interest is paid to stockholders at half-yearly intervals it follows that a holder who purchases just after an interest payment will have a full six months to wait for this first interest payment; whereas one who buys five months later will have only one month to go before receiving a full six months' interest. The first purchaser is buying capital only; the second is buying capital plus accrued interest to date.... see: Accrued Interest

Personal And Business Finance 2018

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