The discussion about accrued interest in another string reminded me of an issue I was never able to resolve: how is accrued interest taxed ? Is it treated as capital gain or as income ? The former would mean adding the accrued interest both to the purchase costs and and to the sale receipts. The latter would mean recording a negative item of income on purchase and a positive item on sale. Neither of these seems to make much sense. However I notice that my broker does not include any accrued interest on my annual statement for income tax purposes. Does this mean that the CGT approach is the right one ?