Gilt coupons are savings income, so the personal savings allowance shelters the first slice of them — £1,000 for a basic-rate taxpayer, £500 for a higher-rate one and nothing for an additional-rate one — and how far a holding reaches into that allowance depends on its coupon and size.
What the allowance is
The personal savings allowance is a slice of savings income a UK taxpayer receives free of income tax. Checked against GOV.UK and HMRC for the 2025/26 tax year, it is £1,000 for a basic-rate taxpayer, £500 for a higher-rate taxpayer and £0 for an additional-rate taxpayer. It is not a separate allowance to claim: it is a 0 per cent band that applies automatically to the first part of a person's savings income once the personal allowance has been used.
A gilt's coupon is savings income paid gross, so it counts towards the allowance alongside any other interest a reader has. The allowance is one figure per person per tax year, not one per account and not one per holding, so a gilt's coupons share it with everything else that produces savings income.
How far a holding reaches into it
Because the allowance is a fixed sum, the amount of a gilt's nominal needed for its coupons to fill the allowance depends on the coupon rate. A gilt paying 4.00 per £100 pays £4.00 of coupon for every £100 of nominal, so a £1,000 allowance is filled by £25,000 of nominal and a £500 allowance by £12,500. The table shows the same arithmetic at each band; the nominal figures are illustrative for a 4.00 coupon and not a quote from any gilt.
| Band | Personal savings allowance 2025/26 | Nominal at which a 4.00% coupon fills it | Coupon left taxable per £100 above it |
| Basic rate | £1,000 | £25,000 | Taxed at 20% |
| Higher rate | £500 | £12,500 | Taxed at 40% |
| Additional rate | £0 | £0 | Taxed at 45% |
The last row is the one readers miss. At the additional rate there is no allowance at all, so a gilt's coupons are taxed from the first pound and the nominal needed to reach the allowance is nothing. A holding that would sit comfortably inside the allowance for a basic-rate taxpayer is fully exposed for an additional-rate one.
Net income (20%) and the allowance added
The gilt lists carry a net income (20%) column: the coupon income per £100 after 20 per cent basic-rate income tax. That column shows the tax on the coupon at the basic rate before any allowance is applied, which is why it is a starting point rather than a final figure. The personal savings allowance then shelters the first slice of that coupon income, so a holding small enough to sit inside the allowance keeps the whole coupon rather than the net-of-20%-rate figure.
Reading the two together is what makes the after-tax coupon visible. Net income (20%) answers what the coupon would keep at 20 per cent with no allowance in play; the allowance answers how much of the coupon is tax-free before that rate ever bites. A reader at the higher or additional rate uses the same idea at their own rate, with a smaller allowance or none.
That is why the same holding can sit comfortably inside the allowance at one band and be fully exposed at another. A coupon income of £800 is entirely sheltered for a basic-rate reader, half-sheltered for a higher-rate reader and not sheltered at all for an additional-rate one, with the same gilt and the same nominal throughout. The allowance is the variable, not the holding.
The allowance sits across all savings, not one holding
A single holding is not the unit that matters for the allowance. The £1,000 or £500 is shared across every source of savings income in the year, so a gilt's coupons compete with any deposit interest for the same slice. A holding whose coupons fall under the allowance on its own may still be partly taxed once other interest is added, and a holding that exceeds the allowance on its own will be taxed on the excess whatever else it holds.
The net redemption yield on the lists carries the same message at the level of the yield. It is the return after income tax on the coupons, solved on a stated rate, and it does not assume any particular allowance: a reader who wants the after-allowance figure starts from the net redemption yield and then allows for the slice the allowance shelters. The allowance moves the bill, not the gilt.
Where to see it
The taxable income report sums a portfolio's coupon interest and accrued interest for a chosen UK tax year, so a reader can see the figure the allowance is measured against rather than adding coupons by hand. The post-tax yield page shows the net income and net yield figures at a range of constant rates, so the coupon's after-tax value can be read at each band before the allowance is considered.
Together they answer the two questions the allowance raises: how much coupon income the year produced, and what that income keeps after tax at a given band. Neither substitutes for a reader's own tax position, which decides the band and the other savings income the allowance must cover. A reader can compare the report's yearly figure directly with the allowance for their band to see how much of it is sheltered before the rate applies, and the tax page then shows what the remainder keeps.
Background, not advice
This article explains how the personal savings allowance applies to 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 nominal figures in the table are illustrative for a 4.00 per cent coupon and are not a quote from any gilt. GOV.UK and HMRC are the primary sources for a real rate, allowance or threshold.