Accrued Income Scheme (AIS) Calculator
Calculate the accrued income scheme (AIS) adjustment when buying or selling bonds between interest dates. Work out the interest charge and relief under ITTOIA 2005 s.619.
Accrued Income Scheme Calculator
The Accrued Income Scheme (AIS) ensures that when bonds are bought or sold between interest payment dates, the seller pays tax on interest accrued up to the sale, and the buyer gets a deduction for interest paid as part of the purchase price.
Number of days from last coupon payment to the transaction date
Frequently Asked Questions
What is the Accrued Income Scheme?
The Accrued Income Scheme (AIS) is a set of rules (ITTOIA 2005 s.619-685) that allocate interest income between buyer and seller when a bond is transferred between interest payment dates. Without the AIS, the buyer would pay tax on the full coupon received, even though part relates to the seller's holding period.
When does the AIS apply?
The AIS applies to interest-bearing securities (gilts, corporate bonds, loan notes) when transferred by UK individuals with holdings over £5,000 nominal. It does not apply to ISA holdings, National Savings certificates, or certain excluded securities. It does apply to gilts (even though gilts are CGT-exempt).
What is an AIS charge?
When a bond seller transfers a bond, they must include in their income the interest accrued from the last coupon date to the transfer date. This is the 'AIS charge' — extra income over and above any coupons actually received.
What is AIS relief?
The bond buyer receives 'AIS relief' — a deduction equal to the accrued interest paid as part of the purchase price. This deduction is set against the first coupon received, ensuring the buyer only pays tax on the interest genuinely attributable to their holding period.
Does the AIS apply to gilts?
Yes. The AIS applies to government gilts even though gilts are CGT-exempt. The AIS ensures sellers of gilts pay income tax on interest accrued to the date of sale, preventing gilts from being used to roll up interest and avoid income tax.
Are there any exemptions from the AIS?
Holdings of £5,000 nominal or less are exempt. ISA holdings are excluded. NS&I savings certificates are excluded. New issues (bought at issue directly) may be excluded from some AIS provisions. Most personal bond investors below the £5,000 threshold have no AIS exposure.
How is accrued interest calculated?
Accrued interest = (Annual Coupon × Days Since Last Coupon ÷ 365). For semi-annual bonds, days between coupon dates are typically 182-184. The standard 'actual/actual' or 'actual/365' day count convention applies for UK gilts.
Does the AIS create a permanent difference or just a timing difference?
The AIS creates a timing difference only — it brings forward the charge on the seller and defers the income on the buyer. The total tax paid over the whole investment period is the same; the AIS simply allocates it correctly between seller and buyer.