Frequently Asked Questions

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

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.

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.

No, credit ratings are not displayed on the website.

Yes, however HM Revenue & Customs rules state that in order to be eligible for holding within an 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).

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.

No, you will receive a pro-rata payment known as the "accrued interest". Conversely, if you buy a bond partway 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.

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

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

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

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 if the issuer falls on 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 be paid out only 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.

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.