Frequently Asked Questions

Here we seek to address some frequently asked questions about corporate bonds and gilts.

If you're unable to find what you're looking for, please do not hesitate to call our Investment Helpdesk on 0117 900 9000 or email us.

• Can private investors trade bonds?

  Yes, but they should form part of a well diversified portfolio. If you are unsure of their suitability please seek advice.

• Do I need a lot of money to trade bonds?

  If you invest in small sums, the returns may be diminished by dealing cost. Bonds traditionally have minimum investments of £1,000 (nominal), although some bonds can have minimums that are significantly higher.

• I own various bonds in my portfolio, why are they not shown on this website?

  There are thousands of Sterling denominated bonds. Not all of them are liquid and we are unable to display accurate price data for all of them. The bonds displayed are selected based on considerations of quality and liquidity. To deal in bonds not shown on this list, please contact us.

  How liquid something is, or its liquidity, is a measure of how easy an asset is to buy and sell without impacting its market price.

• Are credit ratings displayed on the website?

  Credit ratings are not displayed on the website.

• Can I put bonds in my ISA?

  Yes, however HM Revenue & Customs rules state that in order to be eligible for holding within a ISA, the bond should be listed on a recognised stock exchange, or the bonds must be issued by a company which is itself listed (or a major subsidiary thereof).

• Can I put bonds in my SIPP?

  Yes, the majority of SIPP schemes allow you to hold bonds. There is no theoretical barrier, however the bond must be listed on a stock exchange.

• If I sell my bonds before the coupon pays out, will I miss out on the accrued interest?

  No, you will receive a pro-rata payment known as the "accrued interest". Conversely, if you buy a bond part way through its coupon period, you will have to compensate the previous holder. This way, the "clean" trade price of the bond is kept separate from the gradual roll-up of interest.

• What is the income tax position on bonds?

  Income from bonds is paid gross, but is taxable and thus should be recorded on your tax return. If you hold bonds in a ISA or a SIPP, you will benefit from tax free income.

  Remember tax rules can change and the reliefs depend on your personal circumstances.

• What is the capital gains tax position on bonds?

  Profit on Gilts is free from capital gains tax (CGT). The majority of Sterling bonds are free from capital gains tax, providing that they are "Qualifying Corporate Bonds". Broadly speaking this means most bonds apart from convertibles; however it is best to check if any individual issue is disqualified from this. Note, caution should also be used with low or zero coupon bonds, where the capital gain may be viewed as income.

  Remember tax rules can change and the reliefs depend on your personal circumstances.

• What does subordinated mean?

  A subordinated bond is an issue which carries less seniority in the "pecking order" of the company's balance sheet. When times are good, this will make little difference, but in the event of the issuer hitting hard times, the coupon payment on certain classes of subordinated debt may be waived (see below). Also, if the issuing company is forced into liquidation, subordinated debt holders will only be paid out once senior debt has been repaid (note: subordinated debt holders will, however, rank ahead of equity holders). The ranking is as follows (with guidelines of typical features):

  • Senior Debt: this is the best
  • Lower Tier 2: No coupon deferral. The next best after senior debt.
  • Upper Tier 2: Coupon deferral, but cumulative.
  • Tier 1: Coupon deferral, non cumulative.
  • Preference Share. Generally, coupon payment can be waived, non-cumulative.
• Where can I find out the full details of a bond so that I can check its level of security, such as priority ranking, restrictions etc?
  The full details of a bond are available in the prospectus. These documents can normally be obtained from the Investor Relations department (and often the website) of the issuing company.