Tx notes fa22 Final

3.2. Accrued Income Scheme 
In Chapter 12 you will learn that gilt edged securities (government securities) and qualifying 
corporate bonds (corporate loan stock) are exempt from CGT when sold, so without the accrued 
income scheme a taxpayer would be able to avoid income tax on interest income if the security was 
sold just prior to the interest becoming payable, by e
ff
ectively converting what would have been 
taxable income into an exempt gain, for example:
On 1st July 2022 a taxpayer purchased £120,000 (nominal value) of 2.5%pa Exchequer Stock 
(government security) at an actual cost of £125,000. Interest was payable on the nominal value at 30 
June and 31 December. On 1st December 2022 the taxpayer sold the stock for £127,000 including 
the accrued interest. 
The disposal is exempt from CGT but under the accrued income scheme the following amount will 
be treated as income and included in the 2022/23 income tax computation of the taxpayer:
£120,000 x 2.5% x 5/12 = £1,250
The purchaser will receive £1,500 (120,00 x 2.5% x 6/12) of interest on 31 December 2022, but will 
only be assessed on £250 (1,500 - 1,250).
4. Personal allowance 
The Personal Allowance (PA) is a level of tax free income available to UK taxpayers and is deducted 
from Net Income to derive Taxable Income on the Income Tax Computation. It is deducted from the 
analysis columns in the order of firstly non-savings income, followed, if necessary, by savings 
income and finally dividend income.
The normal PA for 2022/23 is £12,570. 
This is gradually reduced to nil where a person’s adjusted net income (ANI) exceeds £100,000. 
Adjusted net income is net income (total income less deductions for gross pension contributions to 
an employer’s occupational pension scheme, loss relief and deductible interest payments) less the 
gross amount of personal pension contributions and gift aid donations.

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