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Conventional gilts (Taxation of gilts (Interest / coupon payments are paid…
Conventional gilts
Taxation of gilts
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Holders on the register, which is held by Computershare may opt to have income tax deducted at source by applying to them
All interest/ coupons are classed as income and must be declared on tax returns, this includes any interest uplift on index linked gilts however the uplift in principal as a result of index linking is not deemed to be interest and therefore is not taxable
An individual UK investor selling or otherwise transferring gilts could be liable to income tax on any interest which has accrued up the transfer, under the accrued income scheme
The accrued income scheme relives an investor from tax on interest / coupons which accrued before the investors acquisition of the gilt or after the investors disposal of it
Investors whose holding of all securities within the accrued investment scheme have not exceeded £5,000 nominal during the relevant year of asset or the previous one are outside of these rules
Profits or losses made on the disposal of gilts including on redemption are not taxable and do not have to be included on an investors tax return as either capital or income
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Gilt STRIPS
In the gilt strip market (Separate Trading of Registered Interest and Principal of Securities) a gilt is broken down - that is stripped of its semi annual coupons
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Strippable gilts are conventional fixed coupon gilts and all issues of new conventional gilts will be strippable
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Gilt settlement
Takes place electronically through the Euroclear settlement system where they are held in dematerialised form
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The least complex of all government bonds and make up the largest share in the UK government's liability portfolio
Government bonds with an absolute guarantee given by the UK government to pay the holder a coupon every six months until maturity
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The minimum amount of gilts that can be purchased is £1,000
Traditionally gilts have been issued with maturities of 5, 10 and 30 years
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Irrespective of how much an investor pays for a conventional gilt (premium or discount) and whether purchased in the primary or secondary markets, they will only ever receive the principal amount at maturity
Appropriate for investors requiring a guaranteed return of capital combined with a known level of income
No penalty for selling gilts before their redemption date, although investors may suffer form negative changes in interest rates
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