The gilt is unchanged inside an ISA, but because the account shelters its coupons from UK income tax, the net redemption yield inside the wrapper matches the gross yield, while outside it the net figure falls by the tax on the coupon at the holder's band.
The gilt is the same, the wrapper is not
A gilt held inside an Individual Savings Account carries the same clean price, the same coupon and the same £100 at maturity as one held in a taxable account. What changes is the tax on the income it pays. Income and gains inside an ISA are free of UK income tax and capital gains tax, so the coupons a gilt pays within the wrapper do not count towards taxable savings income.
For a gilt the shelter that matters is the one on income, because the gains are already outside capital gains tax. A disposal of gilts is exempt from capital gains tax for individuals in any case, so the account adds nothing on the capital side; it earns its place by removing the income tax on the coupons.
Inside the wrapper, net and gross meet
The net redemption yield on the gilt lists is the return after income tax on the coupons. Inside an ISA there is no income tax on the coupon, so there is nothing to deduct, and the net redemption yield that a wrapped holding would keep matches the gross yield. The two columns that separate outside the wrapper converge inside it.
The same is true of the real yield. For an index-linked gilt, the net real yield is the real yield after income tax on the coupons; held in an ISA there is no coupon tax, so the net real yield matches the gross real yield. The wrapper does not change what the gilt pays, only whether the coupon is taxed on the way to the holder.
Outside the wrapper, the band decides the gap
Outside a wrapper the coupon is savings income, taxed at the holder's marginal rate after the savings allowances. The table takes an illustrative gilt paying 4.00 per £100 and shows the coupon's after-tax value inside and outside the wrapper at each band. The coupon is illustrative and not a quote from any gilt; the rates are for the 2025/26 tax year and come from GOV.UK and HMRC, shown before any personal savings allowance is applied.
| Where held | Income tax on the coupon | Net income per £100 |
| Inside an ISA | None | £4.00 |
| Taxable, basic rate 20% | £0.80 | £3.20 |
| Taxable, higher rate 40% | £1.60 | £2.40 |
| Taxable, additional rate 45% | £1.80 | £2.20 |
The inside-ISA figure is the gross coupon; the taxable rows fall by the tax at each band. The gap between the wrapper and the taxable account is the income tax on the coupon, and it widens as the band rises. A reader comparing the two is really comparing the coupon untaxed with the coupon taxed at their own rate.
The allowance can narrow the outside figure
The taxable rows above show the coupon before the personal savings allowance. At the basic and higher rates the allowance shelters the first slice of a holding's coupons — £1,000 at the basic rate and £500 at the higher rate for the 2025/26 tax year — so a small enough taxable holding can keep more of its coupon than the bare net figures suggest. At the additional rate there is no allowance, and the outside figure stands as shown.
The comparison in the table is therefore a before-allowance one, which is the right shape for showing what the wrapper does: the ISA removes the coupon tax entirely, while a taxable account removes it only up to the allowance. A reader with coupons inside the allowance sees little difference between the two for that slice; a reader above it sees the wrapper keep the whole coupon.
Why the shelter is on income, not gains
It is worth being precise about what the ISA is doing for a gilt. For an equity, an ISA shelters both the dividends and the capital gain; for a gilt there is no capital gain to shelter, because disposals are already exempt from capital gains tax. So the whole of the ISA's benefit for a gilt sits on the coupon, and the net redemption yield inside the wrapper equals the gross yield for that single reason.
Checked against GOV.UK for the 2025/26 tax year, the ISA allowance is £20,000 and gilts count as qualifying investments, so a gilt can be held within the wrapper. A SIPP behaves differently on the way out — income drawn from a pension is taxed as income, so the shelter there is a deferral rather than an exemption — which is why the ISA is the wrapper where the coupon tax disappears outright.
Where to see the two yields
The conventional gilts list carries the gross yield and the income per £100 columns, which are the figures an ISA holding keeps in full on the income side. The post-tax yield page shows the net redemption yield and net income at a range of constant rates, which are the figures a taxable holding keeps once the coupon is taxed at a given band.
Read together, the two pages let a reader see the wrapper's effect on one gilt: the gross column is what the ISA keeps, and the net column at the reader's band is what a taxable account keeps. The gilt does not move between them; only the tax on its coupon does.
Background, not advice
This article explains how an ISA changes the after-tax yield of a gilt; 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 ISA allowance, the savings rates and the capital gains exemption are stated for the 2025/26 UK tax year and come from GOV.UK and HMRC; the coupon figures are illustrative and state their inputs. GOV.UK, HMRC and the Debt Management Office are the primary sources for a real tax rule, yield or price.