Skip to main content

This is a new service – your feedback will help us to improve it.

Posted Tue, 30 May 2023 21:14:11 GMT by Jetlyn
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?
Posted Thu, 01 Jun 2023 13:39:36 GMT by HMRC Admin 25
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. 
Posted Sun, 04 Jun 2023 09:34:14 GMT by Jetlyn
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?
Posted Sun, 04 Jun 2023 16:26:41 GMT by Jetlyn
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?
Posted Wed, 07 Jun 2023 15:01:24 GMT by HMRC Admin 20
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
SAIM2230 - Interest: specific inclusions: discounts: taxation Tax treatment of discounted securities

Thank you.
Posted Wed, 07 Jun 2023 20:10:58 GMT by Jetlyn
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?
Posted Fri, 09 Jun 2023 15:37:24 GMT by HMRC Admin 10
Please refer to further guidance at :
Deeply discounted securities
Posted Fri, 09 Jun 2023 15:43:24 GMT by Jetlyn
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?
Posted Thu, 15 Jun 2023 15:09:10 GMT by HMRC Admin 25
Hi Jetlyn,
Your understanding is correct. 
Thank you, 

You must be signed in to post in this forum.