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HMRC internal manual

Savings and Investment Manual

Interest: taxation of interest: accrued interest

Transfers of securities or deposits

Where a person sells interest-bearing securities ‘cum dividend’, in other words he or she does not receive the next interest payment due on the securities, he or she cannot be taxed under general principles on the element of the sale price that relates to accrued interest (Wigmore v Thomas Summerson and Sons Ltd, 9TC577). However, the Accrued Income Scheme (SAIM4000 onwards) allows the transferor to be taxed on the accrued interest, with corresponding relief for the transferee. Interest on securities taxable under the Accrued Income Scheme (AIS) is exempt where the interest is covered by accrued income losses.

Similarly, if the ownership of a bank account or other interest-bearing investment changes, the new owner will be taxable on the whole of the next interest payment that is credited or paid.