The clean price is what the gilt is worth and the dirty price is the cash you hand over, and the difference between them is the accrued interest built up to the settlement date.
The clean price is not the cash
A gilt's quoted price is the clean price: the value of the gilt itself, before the interest that has built up since the last coupon. When you buy, you do not pay the clean price. You pay the dirty price — the clean price plus accrued interest — because the seller has held the gilt through part of the coupon period and is owed that slice of the next coupon. The clean price tells you what the gilt is worth; the dirty price tells you what leaves your account.
The two part company most between coupons and draw together on a coupon date, when the accrued interest resets near zero. That is why a price that looks tidy on the screen can become a slightly larger cash figure at checkout: the difference is the running interest, not a hidden charge.
Accrued interest is built from days
Accrued interest grows by the day between coupon payments. For a conventional gilt paying a fixed coupon twice a year, the amount is the coupon per £100 multiplied by the days accrued divided by the days in the coupon period. Because the coupon is paid in two half-yearly instalments, the coupon per £100 in that sum is half the annual rate, and the days in the period are counted on actual calendar days. The result is a figure in pounds per £100 nominal.
Accrued interest is not a fee or an extra cost. It is interest the seller has already earned and the buyer reimburses, and it comes back as part of the next coupon.
Two gilts with the same annual coupon can carry different accrued interest on the same day, because their coupon periods need not fall on the same dates. What matters is how far into its own period each gilt has moved, which is why the days accrued and the days in the period both appear in the sum rather than the coupon alone.
The day count is the part that moves daily. Everything else in the sum — the coupon rate, the half-yearly split, the length of the period — is fixed by the gilt's terms, so the only input a reader changes by choosing a settlement date is the number of days accrued.
Working the arithmetic
The figures below are illustrative and not a quote from any gilt; every input is stated so the sum can be checked. Take a gilt with an annual coupon of 4.00, so half-yearly it pays 2.00 per £100 nominal, in a coupon period of 182 days. If 45 days have accrued by the settlement date, the accrued interest is 2.00 × 45 ÷ 182, which is about £0.49 per £100 nominal. Add that to a clean price of 98.50 and the dirty price is about £98.99.
| Component | Per £100 nominal | How it is worked out |
| Clean price | £98.50 | The market price of the gilt |
| Accrued interest | £0.49 | 2.00 × 45 ÷ 182, illustrative |
| Dirty price | £98.99 | Clean price plus accrued interest |
Scale it to the nominal you buy
The dirty price is per £100 nominal, so the cash you pay is the dirty price times the number of £100 units. On £1,000 nominal — ten units — the illustrative dirty price of £98.99 becomes £989.90, of which £985.00 is the clean price and £4.90 is accrued interest. The accrued slice is not an extra charge: the seller earned it, and it comes back to you as part of the next coupon.
Reading the three figures together is what reconciles the screen to the statement. The clean price times the units is the gilt's own cost; the accrued interest times the units is the interest you are taking over; and the two add to the cash.
Where the settlement date enters
Accrued interest is measured to the settlement date, not the trade date, so a trade that settles a few days later carries a little more of it. The record-a-trade form starts from the settlement delay on your profile and shows the derived dirty price, so the figure that matters is the one on the settlement date. The conventional gilts list carries the clean price and accrued interest for every gilt, which is where the two inputs come from.
A useful habit is to fix the settlement date first and read the prices second. Once the settlement date is known, the accrued interest is a single number, and the clean price plus that number is the cash before fees. Reading them in the other order — price first, dates later — is how a checkout figure comes as a surprise.
What a coupon date does to the split
The clean and dirty prices behave differently across a coupon date, and watching that is a good way to fix the difference in mind. Just before a coupon is paid, the accrued interest is at its highest, so the dirty price sits furthest above the clean price. On the coupon date the accrued interest resets near zero, and the two prices draw together almost exactly.
For a buyer this is a timing fact rather than a reason to deal on one day rather than another. Buy just before the coupon and you pay a large accrued slice and receive the full coupon shortly after; buy just after and you pay almost no accrued interest but wait a full period for the next coupon. The dirty price and the income move together, so the two roughly offset.
Background, not advice
This guide explains how the clean price, accrued interest and dirty price combine at checkout; it is general background, not investment, tax or legal advice for any reader's circumstances. Prices move, so a figure read on one day differs from the next, and the dirty price you pay is not the amount returned at maturity. The gilt's own record and the day's market data are the primary sources for real prices and accrued amounts.