Disposals of gilts are exempt from capital gains tax for individuals, so a sale's realised gain or loss does not enter a CGT computation — but the coupons remain taxable savings income, so the exemption is about the capital, not the whole return.
The exemption is on the capital
For a UK-resident individual, a disposal of gilts is exempt from capital gains tax. Checked against GOV.UK and HMRC for the 2025/26 tax year, a gain or loss made when a gilt is sold — or when it matures — does not enter a capital gains tax computation and does not use any of the annual exempt amount. The realised P&L on a gilt is therefore a capital figure with no CGT line behind it, whether the holding is sold before maturity or redeemed at par.
This is a feature of the instrument, not of the wrapper: the exemption applies whether the gilt sits in a taxable account, an ISA or a SIPP, because the disposal itself is outside capital gains tax for individuals. A wrapper adds nothing on the capital side for a gilt, because there is no capital gains charge to shelter in the first place.
What the exemption does not touch
The coupons are a different matter. A gilt's coupon is savings income paid gross, taxed at the holder's marginal rate after the savings allowances, in the same way as any other interest. The exemption removes a capital gains charge on the disposal; it does not remove the income tax on the coupons that the disposal was delivering.
That is why the net redemption yield on the gilt lists is the yield after income tax on the coupons, not after any capital gains tax. There is no capital gains tax to deduct, so the only tax the net figure carries is the tax on the coupon income. A reader who assumed a sale's gain was taxed would overstate the bill; a reader who assumed the coupons were tax-free would understate it.
The same exemption applies whether the gilt is sold before maturity or redeemed at par. A reader who holds to maturity and receives the nominal back has made a disposal just as a seller has, and the repayment is exempt in the same way. There is no distinction between the two routes out of a gilt for capital gains purposes: both leave the capital outside the charge and the coupons inside it.
A realised gain beside the same holding's coupons
The table sets a sale's realised P&L against the coupon income of the same holding. The figures are illustrative and not a quote from any gilt; every input is stated so the split between capital and income can be checked.
| Measure | Illustrative figure | Tax treatment |
| Nominal held | £10,000 | The size of the holding |
| Purchase clean price | £96.00 per £100 | Cost of the capital |
| Sale clean price | £99.50 per £100 | Proceeds of the capital |
| Realised P&L (capital) | £350 gain | Exempt from CGT for individuals |
| CGT due on the gain | £0 | No charge, no allowance used |
| Coupon received in six months | £200 | Savings income, paid gross |
| Income tax on the coupon at 20% | £40 before allowances | Savings income tax |
The £350 of realised P&L attracts no capital gains tax at all, while the £200 of coupon income does attract income tax, here shown at 20 per cent before any savings allowance is applied. The same holding produces both lines, and only one of them is taxed. In practice the personal savings allowance may reduce the £40, which is why the figure is labelled before allowances rather than as a final bill.
The index-linked uplift is capital too
An index-linked gilt carries the same exemption on its disposal, and the uplift to capital that comes from inflation is part of that disposal rather than a separate taxable gain. The coupon on an index-linked gilt is still savings income, taxed in the ordinary way, so here too the capital side is exempt and the income side is not.
The point survives the difference between the two kinds of gilt: whether the capital return arrives as a discount pulling up to par or as an inflation uplift, it is exempt from CGT for an individual, and the coupon that runs alongside it is not.
Where the two figures sit
The portfolio page shows the realised P&L on positions already sold, which is the capital side of the picture, without a capital gains tax line to subtract because there is none. The post-tax yield page shows the net redemption yield and the net income figures, which are the income side once tax on the coupons is deducted.
The portfolio's realised P&L is a cash figure, computed from the trades and the prices at which they settled; the tax page's net figures are yields on the coupon. One is about what the capital did, the other about what the income keeps, and the exemption is what lets the first stand with no tax line behind it.
Reading them together is what separates the two halves of a gilt's return. The portfolio answers what a holding has made or lost on its capital; the tax page answers what its coupons keep after income tax. A reader who wants the full after-tax result needs both, because no single figure carries the exemption and the coupon tax at once — and the exemption is a fixed rule of the instrument, not a figure that moves with the market.
Background, not advice
This article explains how a gilt's capital gain and its coupon income are treated for tax; 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 treatment described is the general position for a UK-resident individual and is stated for the 2025/26 UK tax year, sourced from GOV.UK and HMRC; the figures above are illustrative and state their inputs. GOV.UK, HMRC and the Debt Management Office are the primary sources for a real tax rule, price or coupon.