A gilt is a loan to the UK government that pays a fixed coupon for its life and repays £100 of nominal at maturity, so owning one means owning a known stream of cash rather than a share of anything.
A gilt is a loan to the government
Gilts — short for gilt-edged securities — are bonds issued by the UK government. When you buy one, you are lending money to HM Treasury. In return the government pays you interest, called the coupon, while you hold the gilt, and it repays the amount you lent on a fixed maturity date. A gilt is not a share: it gives no ownership of anything and no claim on profits, only the right to the interest and the repayment written into its terms.
Because the borrower is the UK government, gilts are generally regarded as one of the lower-risk ways to lend money. That does not make them free of risk: their price moves with the market, and an index-linked gilt's cash depends on inflation. But the borrower itself is the state, so the main risks a holder faces are about price and inflation rather than about the borrower failing to repay.
The coupon is the rent on the loan
The coupon is the fixed interest paid each year, per £100 of nominal value, usually in two half-yearly instalments. It is the return for lending the money, much as rent is the return for lending a property. A 4% coupon pays £4.00 a year on every £100 of nominal, so a holding of £1,000 nominal receives £40.00 a year. The coupon is fixed at issue and does not change for the life of the gilt.
The word nominal is important. The coupon is applied to the nominal value — the £100 per unit that will be repaid — not to the price you paid. If you buy £100 nominal for less than £100, you still receive the coupon on the full £100 nominal. That is why a gilt bought at a discount can return more than its coupon suggests.
Because the coupon is fixed while the price is not, the two together decide the yield — the annualised return a holder would earn by keeping the gilt to maturity. A reader who knows only the coupon has half the picture, since the same coupon produces a different yield depending on the price paid for it. That is why the site shows the yield beside the coupon rather than the coupon alone.
Redemption returns the nominal
Every gilt has a maturity date, on which the government repays the nominal value. For a conventional gilt that repayment is exactly £100 per £100 nominal held, regardless of what the price did in between. Redemption is the event that turns the running interest into a final lump sum: the coupon stops, and the loan is repaid.
Redemption is why the price of a gilt tends back toward £100 as maturity approaches. A gilt trading well below £100 has, built into its price, the expectation of a larger repayment than the price paid; a gilt trading above £100 has the reverse. The closer the maturity, the smaller the gap between price and repayment, because there is less time for the market's view to change.
What a holding pays over its life
Putting the coupon and the redemption together gives the total cash a holding returns if it is kept to maturity. The figure that completes the picture is the dirty price — the clean price plus the accrued interest — because that is what the buyer actually paid for £100 nominal. The return is the coupons received plus the £100 repaid, less the dirty price paid.
| Item per £100 nominal | Illustrative figure |
| Dirty price paid (what the buyer pays) | £99.73 |
| Coupon received each year (4% for five years) | £4.00 |
| Coupon over the life | £20.00 |
| Redemption at maturity | £100.00 |
| Total cash received | £120.00 |
| Net of the dirty price paid | £20.27 |
The arithmetic above is illustrative and not a quote from any gilt: it assumes a dirty price of £99.73, a 4% coupon and a five-year hold. On £1,000 nominal the buyer pays £997.30, receives £200.00 of coupons over the five years and £1,000 at maturity, for £1,200.00 in total — £202.70 more than was paid. None of these are current figures; they show how the coupon and the redemption combine against the price paid.
Two kinds of gilt in one line
The description above fits a conventional gilt, whose coupon and redemption are fixed in pounds. An index-linked gilt works the same way but scales both the coupon and the repayment by the index ratio, so its cash keeps pace with measured inflation. The conventional gilts list and the index-linked list show the two kinds side by side, each with its own coupon and price columns.
The difference between the two is not about which is safer in the abstract, but about which kind of certainty a holder wants. A conventional gilt fixes the pounds; an index-linked gilt fixes their purchasing power. Both are government debt of the same credit, and both can fall in price before maturity, so the choice turns on whether the cash or its real value is the thing that needs to be known in advance.
Where to take it next
The Help and user guide explains how to read each column on the site, including the clean price, the accrued interest and the dirty price that this guide has used. Reading that guide alongside a gilt's own row is the quickest way to turn the mechanics here into a familiar picture of what a holding pays and what it costs.
Background, not advice
This guide explains what a gilt is and how its cash flows work; it is general background, not investment, tax or legal advice for any reader's circumstances. A gilt's price can move before maturity and the figure returned at redemption is the nominal, not the price paid. The gilt's own record is the primary source for its coupon, maturity and repayment terms.