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Bonds are a kind of loan through which governments or companies raise money.

If you buy a bond, there are two important things to remember:

  1. You are technically lending money to the bond issuer
  2. The issuer is obliged to pay you back interest (the bond “coupon”), or the value of the bond (also called the “principal”) at a later date (“the maturity”)

what is a bond?

Important tax implications of bond profits

  • If you earned a coupon from a bond, that income is taxed as income from savings interest
  • If you sell a government bond (also called “a gilt”) for a profit, that profit is tax-free
  • Earnings from bonds held in an ISA are also completely tax-free

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