A coupon is a fixed percentage of nominal paid twice a year, and the cash it pays stays the same whatever the gilt's price — which is why the coupon and the yield answer different questions.
What the coupon pays
The coupon is the fixed interest paid each year, per £100 of nominal value, usually in two half-yearly instalments. It is fixed at issue and does not change, so the cash it pays is the same this year as it will be in every year until the gilt matures. The income per £100 column shows that annual figure directly, so the income a holding pays is the income per £100 multiplied by the number of £100 units held.
A 4% coupon pays £4.00 a year on £100 nominal. On £2,500 nominal — twenty-five units of £100 — it pays £100.00 a year, in two instalments of £50.00. The size of the payment is set by the nominal held, not by the price paid, so a gilt bought cheaply still pays its coupon on the full nominal.
The two instalments fall on fixed dates set by the gilt's terms, commonly six months apart, and each is paid to whoever holds the gilt on the payment date. Because the dates are fixed, the timing of the income is as predictable as its amount. A holder can know in advance which tax year each instalment will fall into by reading the payment dates, since the date the cash is paid — not the date the gilt was bought — decides the year it counts towards.
The coupon is not the yield
The coupon and the yield are frequently confused, and the confusion comes from both being percentages. The coupon is a percentage of nominal; the yield is a percentage of the price. When a gilt trades near its £100 nominal the two are close, which is why the confusion survives. Once the price moves away from £100 they separate.
If a 4% gilt is bought at a discount — say below £100 — the holder receives £4.00 a year on £100 nominal and also gains the difference between the price paid and the £100 repaid at maturity. That extra gain lifts the annualised return above 4%, so the yield is higher than the coupon. Buy the same gilt at a premium and the yield is lower than the coupon, because the holder repays less than was paid. The coupon tells you the cash; the yield tells you the return.
A reader can keep the two apart with one question: is the figure a percentage of the nominal or of the price? The coupon is always of the nominal and never moves; the yield is always of the price and moves whenever the price does. Once that question becomes habit, the two columns stop looking like versions of the same number and start reading as two different facts about the gilt.
Same coupon, different return
The table below shows why two holders of gilts with the same coupon can earn different returns. The figures are illustrative and not quotes from any gilt; they show how the price paid changes what the coupon is worth as a return.
| What a reader sees | A gilt at a discount | A gilt at a premium |
| Coupon | 4.00% | 4.00% |
| Income per £100 | £4.00 a year | £4.00 a year |
| Price paid per £100 nominal | £95.00 | £108.00 |
| Return over the life | Raised by the gain to par | Reduced by the loss to par |
| Which is higher | The yield, above the coupon | The coupon, above the yield |
The size of that effect depends on how long is left. The gain to par or the loss to par is spread over the remaining life, so the annual uplift or drag on the yield shrinks as maturity gets closer. A gilt with many years to run can have a yield a long way from its coupon; one close to maturity has a yield much nearer to it. That is why two gilt rows quoting the same coupon can still show visibly different yields.
How the income behaves over the life
For a conventional gilt the income is flat: the same coupon arrives twice a year for as long as the gilt is held, and then the £100 nominal is repaid. The cash does not grow with prices, so its purchasing power is eroded by inflation over the gilt's life. That is a feature of fixed cash, not a fault: it is the predictability of the pounds that a conventional coupon offers.
An index-linked gilt behaves differently. Its coupon is a real rate applied to a nominal that grows with the index ratio, so the cash income rises with measured inflation. The stated coupon looks smaller because it is a real rate rather than a cash rate, but the pounds it pays grow over time. Reading an index-linked coupon and a conventional coupon as if they were the same is one of the commonest mistakes in comparing the two.
Where to read the coupon
The conventional gilts list shows the coupon and the income per £100 for each gilt beside its price and yield, so the cash and the return can be read together. The Help and user guide explains each column and how the income relates to the price, which is the quickest way to see why a coupon of 4% does not mean a return of 4%.
Reading a gilt's coupon without its price is like reading a dividend without the share price: the cash is real, but the return it represents depends on what was paid for it. The list places the coupon and the yield together so the cash and the return can be seen as one holding described two ways, rather than two unrelated figures that happen to sit on the same row.
Background, not advice
This guide explains what a coupon pays and how it differs from the yield; it is general background, not investment, tax or legal advice for any reader's circumstances. A coupon's cash is fixed but its purchasing power is not, and the return on a gilt depends on the price paid. The gilt's own terms are the primary source for its coupon and payment dates.