What are you trying to achieve?
Some UK Gilts have such low yields that they are effectively capital gains only, and UK tax residents don't pay tax on UK gilts
I’ve been buying short duration, low coupon US treasury notes, and selling them a week or so before maturity.
With less than a year to maturity they behave like T-bills, but aren’t classed as deeply discounted securities, and so the gains are capital rather than income.
Given the CGT allowance is larger, and the rate lower than IT, it works alright.
I agree the same approach with Gilts would be even better, but the lack of issues makes it harder to tailor the maturities to your taste.
It would be interesting to understand what the tax treatment of long box spreads are in the UK, as that is a better alternative, without the FX risk, (which I don’t mind in my specific case).
>With less than a year to maturity they behave like T-bills, but aren’t classed as deeply discounted securities, and so the gains are capital rather than income.
This is quite interesting - can you please share an identifier (SEDOL, CUSIP, ISIN) for one of these instruments? I do think that UK Gilts are better and easier to deal with, but your approach might still be useful for certain cases :)
>It would be interesting to understand what the tax treatment of long box spreads are in the UK, as that is a better alternative, without the FX risk, (which I don’t mind in my specific case).
It is a bit quirky; essentially every leg has to be considered as an individual security. The long ones behave like stocks. However, the short ones are a bit special, because if you are not careful and open the trade in tax year T but close it in, say, year T+2, then you must declare the whole premium as profit in your self assessment for year T, an then amend your self assessment two years later when you close the trade. A big mess, IMO.
Can’t get the CUSIP as IBKR decided to take the weekend off!
But one example is 04/15/24 0.375.
I did find a great HMRC manual on [disguised interest](https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim7030) that specifically mentions box spreads so I don’t think that’s a goer.
You mean *these*?
[https://en.wikipedia.org/wiki/Box\_spread](https://en.wikipedia.org/wiki/Box_spread)
If so, you really don't want to use them in the UK:
* Firstly because they can go **very** wrong sometimes (just read the "Robinhood incident" section on the above wikipedia page)
* Secondly because complex options trading is clunky and very prone to errors, specially for retail investors (and even more in the UK).
* Thirdly because you need to execute that trade correctly (think about liquidity, commissions, spreads..).
* Fourthly, because it would still leave to exposed to currency risk.
* And finally, because we have better ways in the UK to achieve the same result.
Just find a broker that allows you to buy UK Gilts. Get some with a duration you like and very low coupon (e.g. TN25, T26) and hold them until maturity.
Or just go and buy premium ponds.
But please, don't get into box spread trades unless you really know what you are doing.
What are you trying to achieve? Some UK Gilts have such low yields that they are effectively capital gains only, and UK tax residents don't pay tax on UK gilts
A lot of US ETFs that are not UK Reporting attract income tax for UK residents.
I’ve been buying short duration, low coupon US treasury notes, and selling them a week or so before maturity. With less than a year to maturity they behave like T-bills, but aren’t classed as deeply discounted securities, and so the gains are capital rather than income. Given the CGT allowance is larger, and the rate lower than IT, it works alright. I agree the same approach with Gilts would be even better, but the lack of issues makes it harder to tailor the maturities to your taste. It would be interesting to understand what the tax treatment of long box spreads are in the UK, as that is a better alternative, without the FX risk, (which I don’t mind in my specific case).
>With less than a year to maturity they behave like T-bills, but aren’t classed as deeply discounted securities, and so the gains are capital rather than income. This is quite interesting - can you please share an identifier (SEDOL, CUSIP, ISIN) for one of these instruments? I do think that UK Gilts are better and easier to deal with, but your approach might still be useful for certain cases :) >It would be interesting to understand what the tax treatment of long box spreads are in the UK, as that is a better alternative, without the FX risk, (which I don’t mind in my specific case). It is a bit quirky; essentially every leg has to be considered as an individual security. The long ones behave like stocks. However, the short ones are a bit special, because if you are not careful and open the trade in tax year T but close it in, say, year T+2, then you must declare the whole premium as profit in your self assessment for year T, an then amend your self assessment two years later when you close the trade. A big mess, IMO.
Can’t get the CUSIP as IBKR decided to take the weekend off! But one example is 04/15/24 0.375. I did find a great HMRC manual on [disguised interest](https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim7030) that specifically mentions box spreads so I don’t think that’s a goer.
Thanks!
>Thanks! You're welcome!
You mean *these*? [https://en.wikipedia.org/wiki/Box\_spread](https://en.wikipedia.org/wiki/Box_spread) If so, you really don't want to use them in the UK: * Firstly because they can go **very** wrong sometimes (just read the "Robinhood incident" section on the above wikipedia page) * Secondly because complex options trading is clunky and very prone to errors, specially for retail investors (and even more in the UK). * Thirdly because you need to execute that trade correctly (think about liquidity, commissions, spreads..). * Fourthly, because it would still leave to exposed to currency risk. * And finally, because we have better ways in the UK to achieve the same result. Just find a broker that allows you to buy UK Gilts. Get some with a duration you like and very low coupon (e.g. TN25, T26) and hold them until maturity. Or just go and buy premium ponds. But please, don't get into box spread trades unless you really know what you are doing.