A gilt's coupon is income and the £100 it returns at maturity is capital, so the coupon calendar lists them as separate rows and never nets a redemption against a tax band.
Two events on one date
When a gilt matures, it returns its £100 per £100 nominal on the maturity date. If that date is also a coupon date — and it usually is, because the final coupon is paid at maturity — the holder receives two things at once: the last coupon and the returned principal. On the coupon calendar that gilt appears twice on the date, once as a coupon row and once as a redemption row, rather than as one row whose amount quietly adds income to capital. A calendar that merged the two would leave a reader unable to tell how much of a date's cash was taxable income and how much was returned principal, which is exactly the question a tax-aware view has to answer.
The choice to show two rows is not a display fancy. It is what lets everything downstream treat the coupon and the redemption correctly, because the two are different kinds of money with different tax treatment and different meanings for a holding.
Coupon is income, redemption is capital
A coupon is savings income. For a UK-resident individual it is taxed at the marginal savings rate after the allowances, and it counts on a return in the tax year its payment date falls in. A redemption is different: it is the return of the capital that was lent to the government, at par, and for an individual a gain on a gilt is exempt from capital gains tax. The coupon is income the gilt pays along the way; the redemption is the principal coming back at the end. Treating them as one figure would mix income and capital, and no after-tax figure could then be right.
- A coupon is income, paid twice a year, and taxed as savings income.
- A redemption is the return of capital at par when the gilt matures.
- For an individual, a gain on a gilt is exempt from capital gains tax.
- The calendar lists a maturity date as two rows, not one.
Why the split matters after tax
Because a coupon is income and a redemption is capital, a tax band touches only one of them. When a reader selects a band on the calendar, the net line taxes the coupon at that rate and leaves the redemption at its full amount. That is why the redemption row is never netted: applying income tax to returned principal would understate the cash and misdescribe the event. The split the page draws between the two rows is the same split the tax treatment draws. The same rule runs through a portfolio's taxable income report: coupon interest is summed into the taxable figure, and the principal returned at maturity is not income and does not belong in it.
A maturity date worked through
The table is an illustration and not a quote from any gilt. It shows a £10,000 nominal holding of a notional 4.00 per cent gilt at its maturity date: a final coupon of £200 and a redemption of £10,000, shown gross and at three bands. The rates are the UK savings-income rates for the 2025/26 tax year as published by GOV.UK and HMRC.
| Selected band | Final coupon | Redemption | Cash received |
| Gross (none) | £200.00 | £10,000.00 | £10,200.00 |
| 20 per cent | £160.00 | £10,000.00 | £10,160.00 |
| 40 per cent | £120.00 | £10,000.00 | £10,120.00 |
| 45 per cent | £110.00 | £10,000.00 | £10,110.00 |
The coupon falls with the band — £200 to £160 at 20 per cent, to £120 at 40, to £110 at 45 — while the £10,000 redemption does not move at all. The cash received is the taxed coupon plus the untouched principal. A reader who read the two rows as one £10,200 income figure would be taxing the capital and overstating the tax; the two rows keep each part on its own footing.
What it means for a ladder
The same distinction is why a redemption-funded ladder's draw is capital and its coupons are extra income. On the ladder designer each rung is sized so its redemption funds the year's draw, and the rung's coupon arrives beside it. The draw is a return of principal, not taxable income; the coupon is income and is what a tax band applies to. Read the per-gilt cash-flow schedule on a gilt's own page, opened from the conventional gilts list, and the coupon and the final repayment are listed separately there too, the same way the calendar lists them, so the split holds from the single gilt out to the whole market. A shortfall in a later year, seen this way, is a shortfall of capital to redeploy rather than a shortfall of taxable income — two questions, each with its own answer.
Background, not advice
This article explains why the calendar keeps a coupon and a redemption apart, and how that split lines up with the tax treatment of each. 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 tax treatment described is the general position for a UK resident for the 2025/26 tax year, sourced from GOV.UK and HMRC; the figures above are illustrative and state their inputs, and the primary source for a real coupon, principal or payment date is the gilt's own record and the Debt Management Office.