Taxation of Fixed Income products

[aam123]

Hi,

I was wondering about the taxation treatment of Fixed Income (i.e. Bonds).

It appears to me that dividend/coupon is treated the same as regular income (subject to one's marginal tax rate) whereas any increase in the clean price is subject to CGT. Is this correct?

Is accrued interest treated as regular income, or is it bundled into the capital cost? I would assume the former.

I just mean for regular plain vanilla fixed coupon bonds.


If I have un-invested money left sitting there with the broker for a short period, and I get paid "interest" on that, is that also subject to regular income tax or does DIRT apply there?

 

[dublin67]

May not be that simple - look into the bond washing provisions contained in section 815 TCA. This is an income tax charge and has priority over CGT.

 

[JamesBM]

Hi,

I was wondering about the taxation treatment of Fixed Income (i.e. Bonds).

It appears to me that dividend/coupon is treated the same as regular income (subject to one's marginal tax rate) whereas any increase in the clean price is subject to CGT. Is this correct?

Is accrued interest treated as regular income, or is it bundled into the capital cost? I would assume the former.

I just mean for regular plain vanilla fixed coupon bonds.


If I have un-invested money left sitting there with the broker for a short period, and I get paid "interest" on that, is that also subject to regular income tax or does DIRT apply there?

I believe your interpretation is correct. To determine the income on which income tax etc. is owed calculate the difference between the accrued on the date the purchase was settled and the accrued on the day the sale was settled (or if not sold the difference between the accrued at purchase and the coupon received).
CGT should be calculated based on the difference between the clean price on the purchase settlement date and the disposal clean price on the sale settlement date (or par if held to maturity).