The personal savings allowance is a 0 per cent band that shelters the first slice of savings income automatically, so a gilt's net coupons are higher after the allowance than before it — and the difference is a per-year, per-person figure the coupon payment dates help pin down.
A 0 per cent band, not a claim
The personal savings allowance is often described as if it were an allowance a saver claims, but it works differently. It is a 0 per cent band that applies to the first part of a person's savings income once the personal allowance has been used, so the income inside it is taxed at nothing rather than being removed from the total. Checked against GOV.UK and HMRC for the 2025/26 tax year, the band is £1,000 at the basic rate, £500 at the higher rate and £0 at the additional rate.
Because it is a band rather than a claim, there is no form to send to use it: it is applied to a person's savings income automatically. What a reader needs to know is how much of their income falls inside it, which is why the allowance is read alongside the coupon figures rather than on its own.
It covers all savings income, not a holding
A gilt's coupon is savings income, so it uses the same band as any other interest a reader has. The allowance is one figure per person per tax year, not one per holding and not one per account, so a gilt's coupons share it with deposit interest and any other savings income. A holding whose coupons fall under the allowance on their own may still be partly taxed once other interest is added, and the per-holding figures below assume the holding is the reader's only savings income.
That is the first of two things the allowance asks a reader to keep straight: it is per year, and it is per person. The second is which year a coupon belongs to, because only coupons paid in the year count against that year's band.
The allowance also sits alongside the personal allowance rather than instead of it. The personal allowance is applied to a person's income first, and the personal savings allowance then shelters the first part of whatever savings income remains, so a reader with unused personal allowance can find the first slice of their coupons covered by both before the rate applies. The per-holding figures below assume the personal allowance is fully used elsewhere and only the savings allowance is left to shelter the coupons, which is the common case among savers at the basic rate and above, and the cautious one for the arithmetic.
Net coupons before and after, per holding
The table takes one illustrative holding — £50,000 nominal of a 4.00 per cent gilt, so £2,000 of gross coupons a year — and shows what those coupons keep before the allowance and after it, at each band. The gilt and the nominal are illustrative and not a quote from any gilt; the rates and allowances are for the 2025/26 tax year, from GOV.UK and HMRC.
| Band | Gross coupons | Net before the allowance | Net after the allowance |
| Basic 20% | £2,000 | £1,600 | £1,800 |
| Higher 40% | £2,000 | £1,200 | £1,400 |
| Additional 45% | £2,000 | £1,100 | £1,100 |
The gap between the last two columns is the allowance at work. At the basic rate it lifts the kept coupons from £1,600 to £1,800, because £1,000 is sheltered before the 20 per cent rate applies; at the higher rate it lifts £1,200 to £1,400, on a £500 shelter; at the additional rate there is no allowance, so the before and after figures are the same £1,100. The net income (20%) column on the gilt lists is the basic-rate before-allowance figure, £1,600 on this holding or £3.20 per £100.
How the allowance meets the return
Savings income is paid gross, so the allowance is not taken at source; it is applied when the tax on the year's savings income is worked out. A reader whose savings income stays within the personal allowance and the savings allowances owes nothing on it; a reader whose savings income exceeds the allowances is expected to report it. The allowance is therefore a figure to compare a year's savings income against, not a deduction made before the money arrives.
That is why the per-holding figures above are a comparison rather than a statement. They show what a single holding would keep if it were the only savings income in the year; a reader adds their other interest to see where the allowance actually runs out. The coupon itself is unchanged throughout — the allowance moves the bill, not the gilt. A reader can repeat the comparison for any holding once they know its coupons and their band, and the allowance is the only figure that changes between bands.
Where the figures are
The post-tax yield page shows the net income and net redemption yield at a range of constant rates, which are the before-allowance figures the table starts from. The income calendar sets out the coupon payment dates, which decide which tax year's allowance each coupon counts against — the part of the picture a reader most often gets wrong when comparing figures across a boundary.
Read together they show what a holding's coupons pay, when they fall, and what they keep once the allowance has sheltered the first slice. The allowance is a per-year sum, so the payment dates decide how much of it a holding can use in any given year.
Background, not advice
This article explains how the personal savings allowance meets gilt coupons; 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 allowance figures are for the 2025/26 UK tax year and come from GOV.UK and HMRC; the gilt, the nominal and the coupons are illustrative and not a quote from any gilt. GOV.UK and HMRC are the primary sources for a real rate or allowance.