By Chandraketu Tripathi · Updated April 2026 · Fact-checked Investing · April 2026Gilts are bonds issued by the UK government — specifically by HM Treasury — to raise money to fund public spending. When you buy a gilt, you are effectively lending money to the UK government in return for regular interest payments (called the coupon) and the return of your original investment at the end of the term (called the maturity date). They are considered among the safest investments available because they are backed by the UK government.
How Do Gilts Work?A conventional gilt has three key features: the coupon (annual interest rate, expressed as a percentage of face value), the maturity date (when the government repays your original investment) and the current price (which fluctuates on the secondary market based on interest rate expectations). For example, a gilt with a 4% coupon and a face value of £1,000 pays £40 per year in interest. If you buy this gilt at face value, your yield is 4%. But if you buy it on the secondary market at £900 (below face value), your effective yield is higher — £40 / £900 = 4.44%. This is why gilt yields and gilt prices move in opposite directions. 💡 Gilt yields rose significantly during 2022-2023 as interest rates increased, then fell as cuts began. In early 2026, 10-year gilt yields remain relatively elevated compared to pre-pandemic levels — making gilts more attractive than they have been for much of the last decade for income-seeking investors. How to Buy UK GiltsThere are several ways to buy UK gilts in 2026. You can purchase gilts directly from the UK Debt Management Office (DMO) at new issue auctions. Alternatively, you can buy gilts on the secondary market through a stockbroker or investment platform such as Hargreaves Lansdown, AJ Bell or Interactive Investor. Gilt funds and ETFs (such as Vanguard UK Government Bond Index Fund) offer diversified exposure to a basket of gilts without buying individual bonds. Are Gilts a Good Investment in 2026?Gilts offer capital safety (backed by the UK government), predictable income and diversification from equities. In 2026, with 10-year gilt yields around 4.5-5%, they offer competitive returns versus savings accounts — particularly for additional-rate taxpayers who would prefer income from gilts held inside an ISA (tax-free) versus taxable savings interest. However, gilts are not risk-free in terms of capital value. If you sell a gilt before maturity and interest rates have risen since you bought it, its market price will have fallen and you may receive less than you paid. Holding to maturity eliminates this market price risk but limits your flexibility. ⭐ OUR VERDICT Gilts are a valuable addition to a diversified investment portfolio — particularly for income-seeking investors who want the safety of government backing and predictable cash flows. For most retail savers with under £85,000 to save, a cash ISA or fixed rate bond will be simpler and equally competitive in 2026. For wealthier investors or those inside a SIPP or ISA wrapper who want bond exposure, direct gilts or a low-cost gilt index fund provides efficient access to this asset class. Frequently Asked QuestionsAre UK gilts safe? Gilts are backed by the UK government and are considered one of the safest investments available — the government would need to default on its debt for you to lose your coupon or principal. However, the market price of gilts fluctuates, so if you sell before maturity you may receive more or less than you paid. What is a gilt yield? A gilt yield is the effective annual return on a gilt based on its current market price and coupon. Gilt yields and gilt prices move in opposite directions: when yields rise, prices fall and vice versa. The 10-year gilt yield is widely watched as an indicator of the UK government's long-term borrowing cost. How is gilt income taxed? Gilt coupon payments are subject to income tax. However, any capital gain or loss from buying and selling gilts is exempt from capital gains tax — a significant advantage over other bonds and investments. Gilts held inside an ISA or SIPP are completely tax-free. What is the difference between gilts and bonds? A gilt is specifically a bond issued by the UK government. Bonds is a broader term that includes corporate bonds (issued by companies) and bonds from other governments. Gilts are considered safer than corporate bonds because they are backed by the UK government rather than a private company. |
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