Tax on Corporate Bonds

[Gan020]

During the year I purchased some PAG2 (Paragon) bonds.

The transaction was:
3500 bonds @104.333 = 3651.66
Commission 11.95
169 days interest 98.45
Total 3,762.06

I have received from tax certificate for the year from Hargreaves Lansdown which shows interest paid as £107.19, which is the bi-annual interest at 6.125%. It also says "Please be aware that accrued interest on gilt and corporate bond trades is not included on the consolidated tax certificate. In order to calculate your tax position, please refer to any relevant contract notes which will contain the gross amount of interest where applicable.

In my mind the correct value to include in my tax return is therefore 107.19 -98.45 = £8.74. Have I got that correct?

It don't think it can be anything else, because otherwise you would just sell the bond one day before the interest is due and since corporate bonds like PAG2 aren't subject to capital gains tax, ending up with no tax bill which would be perverse.

[genou]

In my mind the correct value to include in my tax return is therefore 107.19 -98.45 = £8.74. Have I got that correct?

Yes. https://www.gov.uk/government/publicati ... cheme-2019.

I haven't thought about the exemption for small holdings. I'd imagine it doesn't apply where it would work to your disadvantage.

[Gan020]

Thanks for your reply, including the link which gave me confidence this is the correct way to do it.

Whilst writing I was rather concerned that when HMRC triangulate the declared interest on my tax return with that declared by my broker it was going to produce a red flag as I was declaring far less than the certificate. I see having now done my tax return the interest related to corporate bonds goes on the additional information pages not in the interest and dividends from banks and building societies, so they have a way to manage that.