What a gilt actually is — a loan to HM Treasury that pays interest and returns your £100 nominal at maturity — and how conventional and index-linked gilts differ.
What is a gilt?
Gilts — short for gilt-edged securities — are bonds issued by the UK government. When you buy one you lend money to HM Treasury: the government pays you interest (the coupon) while you hold it and repays £100 for every £100 nominal you own on the maturity date. Because the issuer is the UK government, gilts are generally regarded as a low-risk way to lend, which is why they are used for income and for balancing riskier holdings.
Conventional and index-linked gilts
Two broad types trade on the London Stock Exchange, and GiltIQ tracks both:
- Conventional gilts pay a fixed coupon in two half-yearly instalments until maturity, when £100 nominal is repaid. Their purchasing power is eroded by inflation over time.
- Index-linked gilts (ILGs) scale both the coupon and the repayment by the Retail Prices Index through an index ratio, so the cash you receive keeps pace with measured inflation.
Browse the two lists side by side: conventional gilts in issue and index-linked gilts in issue.
Clean price, dirty price and yield
The price you see quoted is the clean price — the market value of the gilt excluding the interest that has built up since the last coupon. When you actually buy you pay the dirty price: the clean price plus accrued interest (for an index-linked gilt, scaled by the index ratio). The yield is the annualised return you would earn if you held the gilt to maturity, taking the coupon, the price you paid and the final repayment together. Yields, not prices, are the headline figures on GiltIQ's lists.
Why prices fall when interest rates rise
A gilt's coupon is fixed at issue. If market interest rates rise, newer bonds pay more, so an existing gilt's fixed coupon becomes less attractive and its price falls until its yield matches the market again — and the reverse happens when rates fall. That inverse relationship is why even a government bond can show price volatility over its life, and why the yield-curve page, which plots every priced gilt against the fitted benchmark line, is such a useful picture of the market.
Where gilts sit in a portfolio
Gilts are a tool, not a one-size-fits-all answer. Their role depends on your timeline, your income needs and your tax position — the taxable income guide explains, for example, why low-coupon gilts can be efficient for higher-rate taxpayers. Nothing on this site is investment advice: gilts carry their own risks, and it is worth reading about where and how to buy them before you start.