Post-tax yield comparison

UK tax residents are typically exempt from Capital Gains Tax on gilts, while the coupons are subject to Income Tax. For an individual taxpayer it is therefore usually preferable to hold gilts with low coupons — and, likely because of that advantage, low-coupon gilts tend to trade at a lower gross yield than high-coupon ones.

This page compares the effective yield of every conventional gilt at a given income tax rate, so you can see which side of that trade-off suits your own position.

Gilt coupons are savings income. The 20/40/45% bands are the rates in force until 5 April 2027; from 6 April 2027 each rises by two points to 22/42/47%. Savings income is taxed at these UK rates wherever in the UK you live. The 48% column is the Scottish top rate, which applies to non-savings income only — so it never applies to a coupon, and it is hidden unless you ask for it.

These figures assume every pound of the gilt's coupon income is taxed at your band. The Personal Savings Allowance (£1,000 at the basic rate, £500 at the higher rate and nothing at the additional rate) and the £5,000 starting rate for savings are not applied here, and both cover all of your savings income rather than only gilt coupons — so if the coupons below would fall within them, the 0% column is the one that applies to you.

Price. Each gilt is priced at the midpoint of its bid and offer clean prices, plus the accrued interest due at settlement — the dirty price, which is what a buyer actually pays. Neither the bid nor the offer is used, so the figures sit in the middle of the spread.

Settlement. T+1: the trade settles the next business day, and every figure is solved from that date. A gilt already inside its ex-dividend period is the one case where the next coupon does not belong to the buyer — it is removed from their cash flows and the accrued interest is negative, rather than the yield being solved on a coupon the seller will receive.

Tax. Each coupon is taxed at its band's rate for the tax year it is paid in. The accrued interest paid for the first coupon is deducted from it before tax, which is the Accrued Income Scheme's relief. That relief applies where the holding is over £5,000 nominal; below that the scheme does not apply, the whole first coupon is taxable, and the figure here is very slightly generous for a small holding.

Redemption. Gilts are exempt from Capital Gains Tax, so the redemption at par is untaxed. That is why a low-coupon gilt bought below par can show a higher net yield than its gross one.

Compounding and costs. Yields are annually compounded, the same convention as a savings account's AER. No dealing costs, commission or further spread is deducted.

Net redemption yield is what the coupons pay after income tax at that band, holding the gilt to redemption. It is compounded the same way the Gross yield column on the gilt lists is, so the two pages quote the same thing rather than two.

Tax-equivalent yield is the gross yield a taxable deposit would need to match this band's net figure. The band starts from your profile's income-tax rate and can be overridden per portfolio.

The table has two groups of columns, and the difference matters. The first applies one rate to every remaining coupon — a constant tax-rate scenario, useful for comparing gilts against each other. The second applies the rate in force when each coupon is actually paid: 20/40/45% up to 5 April 2027, 22/42/47% from 6 April 2027. The second group is what a taxpayer in that band keeps, and on most gilts it sits between the two constant-rate columns named for that band — the 20% column slightly overstates it and the 22% column slightly understates it.