Accrued Interest

Discussion in 'Microsoft Money UK' started by CWatters, Jul 17, 2003.

  1. CWatters

    CWatters Guest

    When you buy a Fixed Interest Bond you pay the previous owner the accrued
    interest to date of purchase. This can be offset against the interest paid
    by the bond for tax purposes (eg so you only pay tax on the interest for the
    period you held the bond).

    How do you get Money to show this on tax reports?
     
    CWatters, Jul 17, 2003
    #1
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  2. On Thu, 17 Jul 2003 08:43:05 GMT, "CWatters"
    <> wrote in microsoft.public.uk.money:

    >When you buy a Fixed Interest Bond you pay the previous owner the accrued
    >interest to date of purchase. This can be offset against the interest paid
    >by the bond for tax purposes (eg so you only pay tax on the interest for the
    >period you held the bond).
    >
    >How do you get Money to show this on tax reports?
    >


    So, you are saying you buy the bond for it's face price, plus costs of
    the pro-rata interest, then 'sell' the bond for the returned interest
    at the end. The chargeable gain is sell minus buy, so it should fit
    nicely into Money.
     
    Jamie Stallwood, Jul 18, 2003
    #2
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  3. CWatters

    CWatters Guest

    "Jamie Stallwood" <> wrote in
    message

    > So, you are saying you buy the bond for it's face price, plus costs of
    > the pro-rata interest, then 'sell' the bond for the returned interest
    > at the end. The chargeable gain is sell minus buy, so it should fit
    > nicely into Money.


    Yes and no. You can enter it OK and money probably calculates any gains
    ok... but Money doesn't do the _Income_ tax calculation correctly.

    The relevant UK tax rules are here...

    http://www.inlandrevenue.gov.uk/pdfs/ir68.htm

    but thats a complex guide so I'll give a small quote..

    "Buyers <snip> If accrued interest is added to the price you pay, you get a
    deduction for that amount against the next payment of interest"

    What does it mean...

    Suppose I buy the bond 1 day before it pays interest and plan to hold it
    indefinitly. In the tax year of purchase I will have paid the previous owner
    364 days Interest and recieved 365 days Interest from the bond. So my tax
    return should state that I got 1 days interest not 365! Money doesn't do
    this calculation it reports the full 365 days.

    In subsequent tax years I _will_ recieve 365 days interest so my tax report
    should say 365 days interest

    In the tax year I sell.... I may recieve 365 days interest plus some accrued
    interest (depending on the date) from the buyer - so the tax report should
    be for _more_ than 365 days interest.

    Colin
     
    CWatters, Jul 20, 2003
    #3
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