how are british war bonds taxed?

Answer 1

If you tell us exactly which War Bonds you are referring to we can give you a precise answer.

If you are referring to Undated 3.5% War Stock, they are taxed as interest income. They have not had tax deducted at source so if you hold any, you will have to pay tax on the income at your marginal rate, not to exceed 20% for a basic rate taxpayer.

You do not have to pay CGT, but must be aware of the bond-washing rules. These have been relaxed in recent years and rarely cause a problem for the average investor.