Gilts Guide: UK Government Gilts Explained — How They Work, Types, Yields and How to Buy in 2026/27

A gilt is a bond issued by HM Treasury, denominated in sterling and listed on the London Stock Exchange. Buy one and you lend money to the UK government. In return, you receive a fixed or inflation-adjusted coupon twice a year and get your capital back at maturity.

The term "gilt-edged" dates to the original certificates, which had gilded edges — a visual marker of their security. The UK Debt Management Office (DMO) manages the gilt market, issuing new gilts via auction and running the Purchase and Sale Service for retail investors. Over £2 trillion of gilts are currently outstanding, with annual issuance running at record levels to fund the budget deficit and refinance maturing debt.

Gilts are quoted per £100 face value and trade in units as small as a penny. They carry an ex-dividend period of 7 business days before each coupon date — buy within that window and the seller keeps the next coupon. Check the ex-dividend dates on the DMO's gilt reference pages before placing a trade.

Why care beyond your portfolio? Gilt yields are the benchmark against which almost all UK borrowing is priced. Your mortgage rate, your employer's corporate bond costs, your pension fund's discount rate — all derive from gilt yields. The 10-year is up 132 basis points over the past month and 57bp over the year. Every base point is a tax on borrowers and a sweetener for lenders. Our explainer on how gilt yields affect your mortgage and savings traces these transmission mechanisms in detail.

Pension funds, insurance companies, and overseas central banks hold the majority of outstanding gilts. But retail investor interest has surged since yields broke above 4% in late 2022 — and the second push above 5% during 2026 has intensified that demand. Hargreaves Lansdown lists over 70 gilts available for online dealing, with record trading volumes from individual investors.

Two types of gilt exist. The choice between them is a bet on whether you fear interest rate risk or inflation risk more.

Conventional gilts pay a fixed coupon every six months and return £100 at maturity. Hold £10,000 nominal of a 4% coupon gilt and you receive £200 every six months (£400/year) plus your £10,000 back at maturity. The coupon never changes — set at auction and locked for life. That certainty is the appeal. The risk is that inflation erodes the real value of those fixed payments.

Look at real prices from Hargreaves Lansdown's gilt listings on 29 April 2026. The Treasury 0.375% October 2026 trades at £98.34 — a short-dated low-coupon gilt where almost all your return arrives as a tax-free capital gain. The Treasury 4.75% December 2030 trades at £101.30 — a higher coupon above par, where your return is heavily weighted towards taxable income. The choice between them is a tax decision as much as an investment one.

Index-linked gilts protect against inflation erosion. Both coupon and principal adjust with the UK Retail Prices Index (RPI), with a lag. The UK pioneered these in 1981 — earlier than almost every other developed economy. If RPI rises 5% over a year, your payments increase by roughly 5% in nominal terms.

With March CPI at 3.3% and CPIH at 3.4%, inflation has stopped falling and looks set to climb again as the oil shock from the Iran crisis feeds through. Lloyds' new forecast assumes 3.4% average CPI for 2026, more than a percentage point above the BoE's 2% target. RPI is running 0.5–1 percentage point above CPI on its formula methodology, which works in the index-linked investor's favour.

The catch with index-linked gilts: RPI can fall, shrinking your payments in a deflationary environment. And many index-linked issues trade at heavily negative real yields when the inflation outlook is benign. Today the 10-year inflation breakeven (the gap between conventional and index-linked yields) is around 3.5% — implying the market is paying the conventional gilt holder above-target inflation expectations.

Conventional gilts suit predictable cash flow needs — perhaps funding known expenses in retirement alongside a pension annuity. Index-linked gilts suit goals 10+ years away where persistent inflation is the primary concern. Many investors hold both. For a broader view of where gilts sit within fixed-income investing, our bonds guide covers corporate bonds and bond funds alongside gilts.

The yield is the annual return you earn by buying at today's price and holding to maturity. It moves inversely to the price: when gilt prices rise, yields fall; when prices fall, yields rise. For deeper context on where yields sit, see our analysis of gilts as the safe haven you actually understand.

Here is the gilt curve as published the night before the 30 April MPC decision:

Three things stand out. First, the front end (1–3 months) is still anchored to the 3.75% base rate with a small premium for term and credit — the market is not pricing imminent cuts. Second, the curve dips slightly between 2 and 5 years before climbing sharply, a sign that traders see scope for rate cuts in 2027–28 even if there are none in 2026. Third, the long end is steep. The 30-year at 5.69% is a 167bp premium over the 10-year, the steepest term spread since 2009, and it reflects deep scepticism about the path of inflation and government borrowing over decades.

Buy the Treasury 3.25% January 2033 at its current price of £91.52 and you receive a £3.25 coupon plus an £8.48 tax-free capital gain at maturity, pushing your yield-to-maturity to roughly 4.7%. Buy at £100 and your yield is just 3.25%. The maths is straightforward — and understanding it is essential for comparing gilts against savings accounts.

Look at the 10-year over the past year. Monthly averages from FRED tell the story:

February's 4.43% average looks like a different era. The breakout above 5% in late March, the partial pullback to 4.75% in early April, and now the second push above 5% on the 29th — that is a 60-basis-point ratchet up the curve in two months. Anyone who bought a 30-year in February at 4.6% is sitting on a paper loss of roughly 17%. Anyone buying today at 5.69% on a 30-year is locking in the highest real yield available on a sovereign credit since the early 2000s.

Three forces are shaping yields right now:

1. The Iran conflict and energy shock. Oil price surges feed directly into UK inflation expectations. Brent crude is trading at $114 per barrel after the Strait of Hormuz was effectively closed and US-Iran nuclear talks stalled. Higher expected inflation means higher gilt yields.

2. Government borrowing. The UK's fiscal position requires continued heavy gilt issuance. The Spring Statement 2026 confirmed spending commitments that markets priced as inflationary. The 30-year gilt yield sits at 5.69% — a vote of no confidence in long-run fiscal discipline.

3. Global bond market contagion. US Treasuries, German Bunds, and Japanese Government Bonds have all sold off in sympathy. UK gilts, as a mid-size sovereign market, are caught in the global repricing.

The 127bp spread between the 3.75% base rate (unchanged since 18 December 2025) and the 10-year is the widest since the gilt crisis of October 2022. For a candid look at the downside, see our piece on why 5% gilt yields can still erode your capital. For the bull case, read why gilts beat your savings account.

The Monetary Policy Committee held Bank Rate at 3.75% on Thursday 30 April 2026 — but the meeting was anything but a quiet hold. Huw Pill, the Bank's chief economist, dissented and voted for an immediate rate rise. The 8-1 split is the most hawkish vote pattern of this cycle, and the accompanying Monetary Policy Report retired any pretence that the next move is down.

Andrew Bailey told the BBC the Iran-driven jump in energy prices had been "a very big shock" and warned the Bank would act "forcefully" if Brent crude reaches $130 a barrel and stays there. Brent closed at $126 the same day. The MPR laid out three explicit scenarios:

• Scenario A. Energy prices fall back, CPI peaks at 3.6% by year-end, then drifts below 3% by autumn 2027. Rates stay at 3.75%.
• Scenario B. Energy unwinds more slowly, CPI peaks at 3.7% and stays elevated longer. Bailey said he places "more weight" on this case. Rates plausibly rise once.
• Scenario C. Oil stays above $120 for the rest of 2026. CPI peaks at 6.2% in early 2027. The Bank flags up to six rate rises taking Bank Rate to 5.5%.

For gilt buyers this morning, the practical takeaways are concrete:

1. The cut narrative is dead. Markets entered Thursday pricing a 25% chance of a June hike and a 5% chance of a June cut. After the report, sterling overnight index swaps repriced the front end of the curve sharply higher. The June 18 meeting is now live for a hike, not a cut, and any 2026 cut needs a benign oil resolution.

2. The yield curve will steepen further if scenario B plays out. The 10-year at 5.02% on 29 April already prices significant inflation persistence, but the 30-year at 5.69% — the highest since 1998 — has more room to move if the MPR's terminal rate path under scenario B feeds through to longer tenors.

3. Short-dated gilts are the asymmetric trade. A 1-2 year gilt held to maturity locks in a known return regardless of which scenario plays out. The Treasury 0.375% October 2026 at £98.34 still delivers ~4.0% redemption yield with capital gain tax-free. Long-dated gilts bought today carry meaningful price risk if scenario C even partly plays out.

4. Watch the May data, not the next meeting. April CPI prints on 21 May. Wage data follows. The April energy price cap took effect on 1 April; food and aviation costs are the channels Pill is watching. If the May numbers confirm a stuck print at 3.3% or higher, the June 18 hike probability moves above 40%.

For the regulated context, the FCA requires platforms to assess your knowledge of bond risk before opening fixed-income dealing. None of the above is a recommendation — it is the playbook the desks are running.

Gilts have a tax structure that, once understood, changes how you compare investments. The 2026/27 tax year — which started on 6 April 2026 — makes this even more relevant because the income tax thresholds remain frozen.

Capital gains tax: completely exempt. Gilts are exempt from capital gains tax for individual investors. Buy at £85, receive £100 at maturity — that £15 gain is tax-free. No annual exemption needed, no reporting required, no cap on the amount. This is a deliberate design feature, not a loophole.

Income tax: applies to coupons. Coupon payments are taxed at your marginal rate. For the 2026/27 tax year: 20% for basic-rate taxpayers (taxable income up to £37,700 above the £12,570 personal allowance), 40% for higher-rate taxpayers (up to £125,140), and 45% for additional-rate taxpayers. Coupons are paid gross — you declare on your self-assessment return. The personal allowance and thresholds are unchanged from 2025/26 — frozen since 2021 and now dragging an estimated 4 million more people into higher-rate tax than when the freeze began.

The below-par strategy — with 29 April 2026 prices. Take the Treasury 0.125% January 2028, currently trading at £93.10 on Hargreaves Lansdown. Buy £10,000 nominal and you pay £9,310. You receive 12.5p per £100 nominal annually (practically zero income tax) plus £690 in tax-free capital gains at maturity. Your effective yield-to-maturity is approximately 4.05%, almost entirely tax-free.

Compare that with a 4.1% savings account for a 40% taxpayer. After tax, the savings account delivers 2.46%. The gilt delivers close to the full 4.05%. That is a 65% improvement in take-home return — and the gilt carries a government guarantee that has held for over three centuries.

ISA and SIPP wrappers. You can hold gilts in a Stocks and Shares ISA or a SIPP, sheltering coupon income from tax entirely. Since CGT is already exempt, the wrapper's main benefit is income tax protection on coupons. A higher-rate taxpayer receiving £1,000 in annual gilt coupons saves £400/year by holding in an ISA. The 2026/27 ISA allowance — £20,000, freshly reset on 6 April — can hold gilts alongside other investments. Our 2026/27 ISA guide covers how to use the full allowance.

A 2026/27 change worth noting: dividend tax. While gilt coupons remain taxed as savings income, the 2026/27 dividend tax rates have increased — basic rate from 8.75% to 10.75%, higher rate from 33.75% to 35.75%. This makes gilts relatively more attractive versus dividend-paying equities for income seekers, particularly in unwrapped accounts.

Inheritance tax. Gilts form part of your estate — no special treatment. Standard IHT rules at 40% above the £325,000 nil-rate band.

The strategic takeaway: higher-rate and additional-rate taxpayers should compare gilts against savings accounts on an after-tax basis, not gross. The numbers almost always favour gilts for below-par issues — and the frozen thresholds mean more people qualify as "higher-rate" each year. Our tax hub and savings hub provide broader context. For the live argument about whether retirement income belongs in a 4.70% 10-year gilt ladder or an equity income portfolio with 5% dividend growth, we publish both sides — read them against each other before committing the pot.

Five practical routes exist. The right one depends on portfolio size, dealing frequency, and whether you want to hold inside an ISA or SIPP. For our full operational walkthrough, see How to Buy UK Government Gilts.

Hargreaves Lansdown. The biggest UK platform with the broadest gilt selection — over 70 gilts dealable online at £5.95–£11.95 per trade depending on your previous month's deal count. ISA and SIPP gilt holdings cap their separate platform fees, which is the main reason HL works for serious gilt investors despite headline fund-fee complaints. Read our full Hargreaves Lansdown review for the cost breakdown.

AJ Bell. Dealing fees from £5 (regular investing) and £9.95 ad hoc, with a 0.25% custody charge that caps at £10/month for shares and gilts inside an ISA. Solid gilt selection covering all liquid maturities, an interface most users find easier to navigate than HL. See the AJ Bell review.

Interactive Investor. Flat-fee model — £11.99/month for the Investor plan covers the platform charge, with one free monthly trade. Gilt dealing on the same fee schedule as shares (£3.99 per trade). Best value once your portfolio passes roughly £50,000, where percentage charges at HL/AJ Bell start to bite. Our interactive investor review covers the maths.

Charles Stanley Direct. A 0.30% custody charge with a £24/year minimum makes Charles Stanley a smaller-portfolio play, but their gilt research and dealing service is good. £11.50 per trade online. Worth considering if you want a platform that takes fixed income seriously rather than treating it as a tick-box. Read the Charles Stanley Direct review.

iWeb (Scottish Widows Share Dealing). The cheapest platform in Britain for dealing-only investors. £5 per trade, no platform fee, no inactivity fee. ISA available with a £100 one-off opening fee. Gilt range is more limited than HL but covers all the most-traded issues. If you are buying-and-holding gilts to maturity and don't need bells and whistles, iWeb is hard to beat. See our iWeb review.

DMO Purchase and Sale Service. The Debt Management Office runs a direct purchase service administered by Computershare. Minimum £100 nominal. Gilts are held on the government register rather than in a nominee account. Slower to execute and more administrative friction, but you cut out platform fees entirely. Best for one-off large purchases held to maturity outside an ISA.

Gilt funds and ETFs (the indirect route). The iShares Core UK Gilts UCITS ETF (IGLT) and Vanguard UK Government Bond Index Fund hold diversified portfolios across maturities. Ongoing charges run 0.07–0.15% annually. The trade-off: you lose the certainty of a known maturity date and redemption price. In a rising-yield environment like 2026, gilt fund NAVs have fallen sharply — IGLT is down roughly 7% year-to-date. Our bonds guide covers these options. The trade-off between direct gilts and bond funds is the subject of our debate pair: Buy Gilts Direct versus A Bond Fund Runs Your Gilt Portfolio for £7 a Year.

NS&I. National Savings & Investments products (Premium Bonds, savings certificates) are government-backed but are not gilts. Different risk-return profile — no price volatility, but lower expected returns and no capital gains tax advantage.

What to buy on 29 April 2026? With the 10-year yield at 5.02% and the MPC verdict due tomorrow, here is a practical framework based on your situation:

• Need capital back within 2 years: Treasury 0.375% October 2026 at £98.34 or Treasury 1.5% July 2026 at £99.46. Minimal price risk, returns mostly via tax-free capital gain.
• 3–5 year horizon, holding to maturity: Treasury 4% October 2031 at £97.15 or Treasury 4.125% March 2031 at £98.19. Yields-to-maturity around 4.7–4.8% locked in with manageable duration risk.
• Long-term income seekers: Treasury 4.75% December 2038 at £95.39. Yield-to-maturity above 5.1%, but more price sensitivity to rate movements.
• Maximum tax efficiency (higher-rate taxpayers): Treasury 0.125% January 2028 at £93.10. Almost all return delivered as tax-free capital gain — the single most tax-efficient fixed-income investment available to UK individuals.
• New for 2026/27 ISA allocation: Consider short-dated gilts inside your freshly reset £20,000 ISA. The coupon income becomes entirely tax-free, stacking with the already tax-free capital gain.

For live yields and links to our full range of gilt analysis, visit the gilts hub.

This article is for informational purposes only and does not constitute financial advice. You should seek independent financial advice before making any investment decisions. Gilt prices fall when yields rise — you can lose capital if you sell before maturity. The tax treatment described depends on your individual circumstances and may change. If you are unsure whether gilts are appropriate for your circumstances, consult a qualified independent financial adviser regulated by the FCA. All prices and yields cited are as of 29 April 2026 and will have moved by the time you read this.