Jurisdiction(s):
United Kingdom

Key definition

Bond definition

What does Bond mean? A bond is a tradable debt security used to raise finance: the issuer borrows from investors and agrees to pay interest (a coupon) and to repay principal on a stated maturity date. Bonds may pay fixed, floating or index‑linked coupons, be zero‑coupon, and redeem at maturity or amortise over time. “Bond” is a descriptive market term rather than a single statutory definition, though bonds sit within the wider regulatory category of transferable securities. Documentation typically comprises a prospectus or offering memorandum and terms and conditions, often constituted by a trust deed with a bond trustee acting for bondholders. Key...

UK Tax for Corporate and Individual Bondholders: Loan Relationships, Interest Withholding, QCB/CGT, Accrued Income Scheme, Stamp Taxes and VAT

Published by a LexisNexis Tax expert

Practice notes

This Practice Note will consider the following:

direct tax issues for UK resident corporate Bondholders
direct tax issues for UK resident individual bondholders
the UK stamp tax and VAT consequences of being a bondholder (whether individual or corporate)

Bondholders may likewise wish to note the possible implications for them of the Foreign Account Tax Compliance Act (FATCA) and the EU Financial Transactions Tax (FTT). These are addressed in Practice Note: Tax issues for Bond issuers—FATCA and FTT.

Direct tax issues for corporate bondholders

For UK resident companies acquiring a bond, the principal tax questions to assess are:

the loan relationship rules—the bond will almost always be a loan relationship and be taxed on that basis
chargeable gains—the bond will almost always be a qualifying corporate bond and exempt from corporation tax on chargeable gains
withholding tax—the bondholder will look to rely on an exemption from withholding tax

Each of these matters is explored further in the remainder of this section.

Loan relationships

As with the bond issuer, the bondholder will almost invariably be treated as having a loan relationship, because the bondholder will be a creditor (ie lender) in respect of money...

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Web page updated on 22/05/2026

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