Coupons are paid in arrears, so buyers and sellers share the interest between payment dates, and the accrued income scheme adjusts the taxable figure for the accrued amount paid on purchase and received on sale — which means the coupon income that meets the £5,000 starting rate for savings is the adjusted figure, not the gross coupons.
Coupons are paid in arrears, so interest is shared
A gilt pays its coupon every six months, but the interest builds up steadily in between. When a gilt is bought part-way through a coupon period, the buyer pays the seller the accrued interest that has built up since the last payment, and the next full coupon then repays the buyer for the slice the buyer actually held. The price a buyer pays is therefore the clean price — the value of the gilt itself — plus the accrued interest; that total is the dirty price, the cash that changes hands.
The clean price and the dirty price are quoted separately because the accrued slice is not really the buyer's interest yet: it is a reimbursement of interest the seller had already earned. A buyer who took the clean price alone as the cost would miss the accrued interest paid over, and would then overstate the taxable interest when the next coupon arrived.
What the accrued income scheme does
The accrued income scheme corrects that by adjusting taxable interest for the accrued amount, rather than taxing the whole coupon whoever happened to receive it. Checked against GOV.UK and HMRC for the 2025/26 tax year, the accrued interest paid when a gilt is bought reduces the taxable gilt interest, and the accrued interest received when a gilt is sold adds to it. The figure that goes on a return is therefore the coupon adjusted for accrued interest, not the bare coupons that landed in the account.
The effect is to charge each holder on the interest earned while they held the gilt, which is what the accrued payment was compensating for. A buyer who paid accrued interest has already handed over the earlier slice, so that slice is taken off the coupon; a seller who received accrued interest has been paid for the slice they earned after their last coupon, so that slice is added on.
A worked adjustment
The table works through one holding over a year. The figures are illustrative and not a quote from any gilt; every input is stated so the adjustment can be checked.
| Step | Amount | Effect on taxable interest |
| Nominal held | £10,000 | At a 4.00% coupon |
| Half-yearly coupon received | £200 | Added, as the coupon that arrived |
| Accrued interest paid on purchase | £90 | Subtracted — already the seller's |
| Accrued interest received on sale | £60 | Added — earned while held |
| Taxable gilt interest | £170 | £200 − £90 + £60 |
The gross coupon over the period was £200, but the taxable gilt interest after the scheme is £170: the £90 paid to the seller at purchase comes off, and the £60 received at sale goes on. A reader who declared the £200 coupon alone would overstate the taxable figure by the net £30, which is the difference between the accrued paid and the accrued received.
The adjusted figure meets the £5,000 band
The £5,000 starting rate for savings, and the personal savings allowance beyond it, apply to savings income as it is actually taxed. Because the accrued income scheme moves the taxable figure up or down, the coupon income that meets those allowances is the adjusted figure, not the gross coupons. So the nominal a reader can hold across a tax year while staying inside the band depends on when their trades settled as well as on how much they held.
At a 4.00 per cent coupon, £125,000 of nominal pays £5,000 of gross coupon in a full year, which is the point at which the band would be filled before any adjustment. Buy part-way through a coupon period and pay accrued interest, and the adjusted figure for that year is lower, leaving more room; sell and receive accrued interest, and it is higher, using more of the band. The band is measured against the adjusted total across all the trades booked in the year, which is exactly the figure the report is built to produce.
That is why two readers with the same nominal and the same coupon can report different taxable gilt interest for the same year. One who bought mid-period and paid accrued interest has a lower adjusted figure than one who held throughout; one who sold and received accrued interest has a higher one. The band is measured against each reader's own adjusted total, not against a gross coupon that every holder shares.
Where the adjustment is made
The taxable income report takes the trades booked in your portfolio and applies the accrued income scheme for a chosen UK tax year: it adds the coupon interest received, subtracts the accrued interest paid on purchases and adds the accrued interest received on sales, giving one adjusted figure per tax year for the allowances to be measured against. The post-tax yield page carries the same idea into the yield, excluding the accrued slice from the taxable base so the whole coupon is not taxed twice.
Reading the report beside the yield page shows the two places the scheme lands: on the annual taxable figure the band is measured against, and on the coupon each yield is solved from. Both rest on the same booked trades, so a correct report is the foundation for either.
Background, not advice
This article explains how the accrued income scheme adjusts taxable gilt interest and how the adjusted figure meets the savings allowances; it is general background, not investment, tax or legal advice for any reader's circumstances, and it is not a substitute for professional tax advice. The scheme and the £5,000 band are stated for the 2025/26 UK tax year and come from GOV.UK and HMRC; the worked figures are illustrative and state their inputs. GOV.UK, HMRC and the Debt Management Office are the primary sources for a real rule, coupon or accrued figure.