Gilts & Government Bond Tax Calculator
Calculate UK tax on gilts and government bonds — interest income, CGT on disposal, and index-linked gilt tax treatment. Gilts are CGT-exempt for individuals.
Gilts & Government Bond Tax
UK gilts (conventional and index-linked) are exempt from CGT for individuals. Interest is taxable as savings income. This calculator works out your interest tax and equivalent after-tax yield.
Basic rate: £1,000 PSA. Higher rate: £500 PSA. Additional rate: £0 PSA.
Frequently Asked Questions
Are gilts exempt from capital gains tax?
Yes. UK government gilts (conventional and index-linked) are exempt from CGT for UK individuals under TCGA 1992 s.115. Any gain or loss on disposal of a gilt is completely disregarded for CGT purposes — making gilts uniquely tax-efficient for investors who expect capital gains.
How is gilt interest taxed?
Gilt interest (coupon payments) is taxed as savings income at your marginal rate (20%, 40%, or 45%). The Personal Savings Allowance (PSA) covers the first £1,000/£500/£0 of interest free of tax depending on your tax band. Gilt interest paid gross can be reported via self-assessment.
What is the difference between conventional and index-linked gilts?
Conventional gilts pay a fixed coupon (e.g., 4.5% per annum) and repay par at maturity. Index-linked gilts have coupons and redemption value linked to the Retail Prices Index (RPI). The uplift to the redemption proceeds on an index-linked gilt is also CGT-exempt.
Can gilts be held in an ISA?
Yes. Gilts can be held in a Stocks and Shares ISA. Within an ISA, neither the interest nor any gain is taxable, making the PSA and CGT exemption irrelevant. Holding gilts in an ISA is most beneficial for additional rate taxpayers (who have zero PSA) or high earners.
What is accrued interest on gilt purchases?
When you buy a gilt between coupon dates, you pay accrued interest (the interest that has built up since the last coupon). This accrued interest is separated under the Accrued Income Scheme (AIS) — you receive a tax deduction for interest accrued before purchase, and pay tax on interest accrued after purchase.
Do corporate bonds have the same CGT treatment as gilts?
No. Corporate bonds (debentures, Eurobonds) are generally Qualifying Corporate Bonds (QCBs) and are also CGT-exempt. However, non-QCBs (including some convertible bonds) are chargeable to CGT. Check the bond's classification before assuming CGT exemption.
How are gilt redemption proceeds taxed?
If you hold a gilt to maturity, the redemption proceeds (par value £100) are received tax-free as the CGT exemption applies. There is no income tax on the redemption amount itself. The coupon payments up to maturity are taxable as savings income.
What is the yield to maturity vs running yield?
Running yield = annual coupon ÷ purchase price. Yield to maturity (YTM) also incorporates the capital gain or loss between purchase price and redemption at par. For a gilt bought below par (e.g., £95), the capital gain element is tax-free, making the after-tax YTM particularly attractive.