US I Bonds & EE Bonds

Hi - how would gains on US I Bonds and EE Bonds be treated? If the bonds were gifted to a person, held to maturity, and then redeemed, would they be capital gains, interest, or nomal income? And would just the interest amount be reportable, or would the face value be included as well?

Hi Jetlyn,
These may be seen as chargeable events and are therefore taxable
Please see guidance here:
HS320 Gains on UK life insurance policies (2023) Updated 6 April 2023
Thank you. 

I'm not sure if you understood the question. I and EE bonds are government bonds, the American equivalent of gilts, not life insurance policies. I've seen discussion on here that indicates they could be taxed in a variety of ways (as capital gains, regular income, interest). I'm sure they're taxable, but not sure of what the starting value would be seen as or the exact type of tax levied on them. Is there someone at HMRC who answers these questions?

One further question - how would the gain be calculated with regard to currency fluctuations? Would gain be calculated by subtracting USD value at the date of redemption from USD value at date of purchase, and only then converted into GBP, or is there some other calculation that should be made?

Hi Jetlyn 

As the bonds were held to maturity, there is not likely to be any CGT to pay.  
Please refer to SAIM3000 - Deeply discounted securities: overview and contents Overview as they are more likely to give rise to income tax on the interest.  
Its not a Deeply Discounted security, just a Discounted one. you can also view
SAIM2220 - Interest: specific inclusions: discounts Discounts and premiums
and
SAIM2230 - Interest: specific inclusions: discounts: taxation Tax treatment of discounted securities

Thank you.

It seems likely that these sorts of bonds are deeply discounted securities - an EE bond from January 1991 bought for $25 has a face value of $50. In 20 years, it is redeemable for face value (plus interest, which is ignored in DDS calculations). The test for a deeply discounted security in SAIM3020 is if the amount payable on maturity exceeds the issue price by .5% a year - in this case, 10%. Given that the face value exceeds the issue price by 100%, I think this is a deeply discounted security - does my math check out?

Hi
Please refer to further guidance at :
Deeply discounted securities
Thankyou.

Hi Admin 10 - That is the SAIM page I was referring to. I was just asking if my understanding of that guidance was correct. Is it not?

Hi Jetlyn,
Your understanding is correct. 
Thank you, 

Hello there: I have bought an American government treasury bond for USD95. The maturity is 31st December 2025, by then, I will get USD100 for redemption (the bond issuing price). Do I need to pay tax for the USD5 if I hold until the maturity. Thanks.

Hi kc,
Sorry, HMRC cannot comment on future events as legislation may change.
Thank you.