qlassa
Member of DD Central
Posts: 57
Likes: 25
|
Post by qlassa on Jul 2, 2023 21:53:49 GMT
The grammar is not great in that statement. I don't invest in gilts, what is it you're saying? Doesn't low coupons infer low interest/yield ?
it followed on from the quoted post. i.e. The risk/reward offer by Somo just doesn't make sense for the reasons stated, and when the (yield to maturity on a) Gilt is virtually tax-free if you chose the low coupon ones. Gilts bought now have a coupon and if held to maturity a defined capital gain. Together that is the yield to maturity, currently 5.3% or so. The coupon is income and taxed accordingly. For gilts, the capital gain is tax free. So for a low coupon gilt (there are many at 0.125% or 0.25%) the capital gain is the vast majority of the YTM. So there is an after tax return of over 5% guaranteed if held to maturity (6 months to 2 years). I have recently bought a load of these short dated, low coupon gilts. Basically it is a guaranteed 5.2% after tax (as a higher rate payer I'd never get that outside an ISA, and my ISAs are full of other stuff). Sorry to jump in, can I ask which platform you used to buy gilts? or just DMO?
|
|
nick
Member of DD Central
Posts: 1,055
Likes: 825
|
Post by nick on Jul 3, 2023 13:09:04 GMT
it followed on from the quoted post. i.e. The risk/reward offer by Somo just doesn't make sense for the reasons stated, and when the (yield to maturity on a) Gilt is virtually tax-free if you chose the low coupon ones. Gilts bought now have a coupon and if held to maturity a defined capital gain. Together that is the yield to maturity, currently 5.3% or so. The coupon is income and taxed accordingly. For gilts, the capital gain is tax free. So for a low coupon gilt (there are many at 0.125% or 0.25%) the capital gain is the vast majority of the YTM. So there is an after tax return of over 5% guaranteed if held to maturity (6 months to 2 years). I have recently bought a load of these short dated, low coupon gilts. Basically it is a guaranteed 5.2% after tax (as a higher rate payer I'd never get that outside an ISA, and my ISAs are full of other stuff). Sorry to jump in, can I ask which platform you used to buy gilts? or just DMO? I use Interactive Investor, but most of the big platforms such Hargreaves Lansdown, AJ Bell, Interactive Brokers etc allow you buy UK gilts.
|
|
IFISAcava
Member of DD Central
Posts: 3,664
Likes: 2,988
|
Post by IFISAcava on Jul 3, 2023 16:49:49 GMT
it followed on from the quoted post. i.e. The risk/reward offer by Somo just doesn't make sense for the reasons stated, and when the (yield to maturity on a) Gilt is virtually tax-free if you chose the low coupon ones. Gilts bought now have a coupon and if held to maturity a defined capital gain. Together that is the yield to maturity, currently 5.3% or so. The coupon is income and taxed accordingly. For gilts, the capital gain is tax free. So for a low coupon gilt (there are many at 0.125% or 0.25%) the capital gain is the vast majority of the YTM. So there is an after tax return of over 5% guaranteed if held to maturity (6 months to 2 years). I have recently bought a load of these short dated, low coupon gilts. Basically it is a guaranteed 5.2% after tax (as a higher rate payer I'd never get that outside an ISA, and my ISAs are full of other stuff). Sorry to jump in, can I ask which platform you used to buy gilts? or just DMO? Interactive Brokers - commission £1 per (£1000 face value) gilt.
|
|
dh1
Member of DD Central
Posts: 373
Likes: 383
|
Post by dh1 on Jul 5, 2023 21:34:58 GMT
IFISAcava and Ace - thanks for the really useful comments about Gilts above. As it happens, it was very timely indeed and may yet reduce my donations to HMRC! Great work.
|
|
|
Post by c64 on Jul 9, 2023 8:54:07 GMT
Now that real yields are positive I keep being tempted by a gilt ladder as tax-free and index-linked pension stand-in. But, for example:
GB00BYMWG366 0 1/8% Index-linked Treasury Gilt 2046: Bid / Offer 76.99 / 78.49 (LSE site, Friday close).
I feel like a sucker coughing up 1.5 spread to the market maker on that, certainly if I end up trading it in later but even if I am buying and holding. Any of the above brokers somehow able to do better? A J Bell and x-o aren't. The DMO/Computershare service has a tighter spread but a 0.35% each way charge that works out net same.
|
|
SteveT
Member of DD Central
Posts: 6,873
Likes: 7,918
|
Post by SteveT on Jul 9, 2023 20:59:00 GMT
Now that real yields are positive I keep being tempted by a gilt ladder as tax-free and index-linked pension stand-in. But, for example: GB00BYMWG366 0 1/8% Index-linked Treasury Gilt 2046: Bid / Offer 76.99 / 78.49 (LSE site, Friday close). I feel like a sucker coughing up 1.5 spread to the market maker on that, certainly if I end up trading it in later but even if I am buying and holding. Any of the above brokers somehow able to do better? A J Bell and x-o aren't. The DMO/Computershare service has a tighter spread but a 0.35% each way charge that works out net same. Interactive Investor only take Gilt trading orders over the phone but, on both occasions I’ve placed Buy orders, I’ve been quoted rather better than the latest quoted price on the LSE site. Perhaps just lucky timing but … Flat dealing charge of £7.99, IIRC
|
|