Guide · data only
Gilts, made clear
What a gilt is, what its yield actually tells you, how to read the yield curve, and how a gilt compares with a savings account. No jargon left unexplained.
Gilt prices can fall, so your capital is at risk if you sell before maturity. The coupon is taxed as income. Any gain to redemption is free of capital gains tax.
Gilts in 30 seconds
It's a loan to the government
A gilt is a UK government IOU. You lend money, the government pays you a fixed amount of interest twice a year (the coupon), then pays back £100 per gilt on a set date (the maturity).
Its price moves every day
Between being issued and maturing, gilts are bought and sold on the market. So you might pay £96 or £104 for a gilt that will still only pay back £100 at the end.
Hold to the end and you know your return
If you keep a gilt until it matures, you know exactly what you'll get. Sell early, and you get whatever the market will pay that day, which could be more or less than you paid.
What a yield actually is
A gilt's yield is the yearly return you'd get if you bought it today and held it to the end. It's the number to compare with a savings rate. The coupon on its own can be misleading.
Worked example
A 1% gilt with 2 years left, bought for £96
That 3.1% is the redemption yield. The coupon is only 1%, because most of this gilt's return comes from the price rising back to £100. Simplified: real gilts pay coupons every six months.
Price down, yield up
The coupon and the £100 at the end never change. So if you pay less for the gilt, the return on your money is higher, and the other way round. That's why yields go up when gilt prices fall.
Coupon
The fixed interest paid each year on £100 of gilt. It never changes, whatever you paid.
Clean price
What the market pays per £100 of gilt, before any interest that has built up since the last payment.
Running yield
The coupon divided by the price you pay. Your income each year, ignoring the gain or loss at the end.
Redemption yield compare this
Income and the gain or loss to £100, spread over the years left. The fairest single number.
The yield curve, decoded
Plot what the government pays to borrow for 1 year, 2 years, 5 years and so on, join the dots, and you get the yield curve. It shows, at a glance, how much more (or less) you're paid for lending for longer.
These are spot yields: a smoothed rate for each length of loan, worked out from all gilts. A particular gilt's redemption yield will be close, but not identical.
Upward sloping (the usual shape)
Longer loans pay more. Lenders usually want extra for tying money up for longer and taking on more uncertainty.
What this can mean for savings rates: longer fixes have often paid more than short ones.
Flat
Lending for 2 years or 10 pays about the same. This often happens when the outlook for interest rates is unclear.
What this can mean for savings rates: fixed rates for different terms are often similar.
Inverted (downward sloping)
Short loans pay more than long ones. This is often seen when markets expect Bank Rate to come down.
What this can mean for savings rates: short fixes and easy access accounts can pay as much as, or more than, long fixes.
The curve reflects what markets expect, not what will happen. We show it as information, not a forecast.
Gilt or savings account?
Both can lock in a return for a set time. The differences are in protection, flexibility and, for many people, tax.
| Topic | Gilt, held to maturity | Fixed-rate savings |
|---|---|---|
| Who you lend to | The UK government | A bank or building society |
| Protection | Repayment backed by the UK government. Not FSCS deposit protection. | FSCS protected up to £120,000 per person, per banking licence |
| Need money early? | Sell at the market price that day, which may be more or less than you paid | Usually not allowed, or only with a penalty |
| Tax | Coupon taxed as savings income. Gains are free of Capital Gains Tax. | All interest taxed as savings income, above your allowance |
| How to get one | Through a stockbroker or investment platform (fees may apply) | Open an account directly with the provider |
How tax works differently on low-coupon gilts
Gains on gilts are free of Capital Gains Tax. Only the coupon is taxed.
Illustrative figures, not a live gilt. Assumes the gilt is held to maturity by a higher-rate taxpayer. Ignores the Personal Savings Allowance and dealing costs. Your tax position may differ.
Before you buy
- Selling early can mean a loss. If yields rise after you buy, the price of your gilt falls.
- Inflation still bites. Most gilts pay a fixed amount, so rising prices reduce what it's worth. Index-linked gilts are the exception.
- It isn't a bank deposit. FSCS deposit protection doesn't apply; repayment is backed by the UK government instead.
- Buying costs money. You usually buy through a stockbroker or investment platform, which may charge dealing or account fees.
Information only, not a recommendation or financial advice.
Quick questions
Can I lose money on a gilt?
Yes, it is possible. If you hold a gilt to maturity you get the coupons and £100 per gilt. If you paid more than £100, part of what you paid is not returned, so your return depends on the price you paid. Dealing fees and inflation also reduce what you get. If you sell early, you get the market price on that day, which can be lower than you paid.
Why is the coupon so low on some gilts?
They were issued when interest rates were very low. Their price is now below £100, so most of the return comes as a tax-free gain at maturity.
Are Premium Bonds a type of gilt?
No. Premium Bonds are an NS&I savings product. You get prize draws instead of interest, and your money is backed by HM Treasury.
What is an index-linked gilt?
A gilt whose coupon and repayment rise with inflation (RPI), so it protects you against prices rising. Its yields are quoted after inflation.
Gilt yields from the official curve
Individual gilt prices are not listed. These are the official yield-curve points.
Swipe sideways to see every column
| Maturity | Yield | Date | Source |
|---|---|---|---|
| 10y | 5.43% | 13 Oct 2026 | Bank of England |
| 2y | 4.72% | 13 Oct 2026 | Bank of England |
| 5y | 4.99% | 13 Oct 2026 | Bank of England |
How we work out the after-tax figures
The after-tax yield taxes the running yield (coupon divided by clean price) and leaves the rest of the gross redemption yield untaxed, as a stand-in for the capital gain to redemption. The savings equivalent is the fully taxed savings rate that would match that net yield. It ignores the Personal Savings Allowance, so it is a yardstick, not a tax bill.
Would a savings account beat that?
Compare these yields with fixed rate bonds that lock in for a similar term.
Benchmarks
The rates everything else is measured against. Each tile uses that series’ own as-of date.
Premium Bond prizes are not an interest rate. The prize-fund rate is the published rate of the prize fund, not a promise of what one person will win.
Where the numbers come from
- Bank of EnglandDaily gilt yield curves (nominal, real and inflation)
- UK Debt Management OfficeGilts in issue: coupons, maturity dates and amounts
- Office for National StatisticsInflation figures (CPI), to compare real returns
- GOV.UKTax on savings interest and your Personal Savings Allowance
- MoneyHelperFree, impartial guidance on bonds and gilts
Information only, not a recommendation or financial advice. Contains public sector information licensed under the Open Government Licence v3.0 (Bank of England, Office for National Statistics, UK Debt Management Office). Gilt prices can fall if sold before maturity. ClearRates does not sell gilts and shows no broker links. Premium Bonds prize fund 4.35%, as of 14 Oct 2026.