What are UK gilts and how do you invest in them?

What are UK government gilts?

UK gilts are British government bonds issued by HM Treasury, listed on the London Stock Exchange. They're also known as 'gilt-edged securities' because of their reliability as an investment — the UK government has never defaulted on its coupon and principal payments, making UK gilts a secure investment relative to most other fixed income assets.

All government bonds are debt-based investments, which means those who invest in them are essentially lending money to the government. In return, the government agrees to repay this loan with interest and return all of the invested capital at a specific date in the future, known as the maturity date. The interest is usually paid biannually and is known as the coupon. UK gilts tend to mature five, ten or 30 years in the future, though the British government has also issued 50- and 55-year gilts in recent years.

As of July 2026, the 10-year UK gilt yield stands at approximately 4.79%, reflecting the elevated interest rate environment following sustained Bank of England tightening. Shorter-dated gilts (one to three years) yield approximately 4.3-4.5%. These yields represent near-historically attractive levels for income investors compared to the pre-2022 environment. For more on how gilts fit within an income portfolio, see our guides on what are corporate bonds and money market ETFs.

Invest in UK gilts with us 

Access gilts and gilt ETFs via share dealing.

How do UK gilts work?

Like all government bonds, UK gilts are issued with a maturity date, a coupon and a price. The maturity date and coupon are specified in the bond name — such as '4¼% Treasury Gilt 2055'. In this case, the gilt will mature in 2055 and the coupon pays 4.25% interest per annum, or 2.125% biannually.

How much the coupon pays in monetary terms depends on what the bond originally sells for. For example, if a bond sells for £100 and the coupon is 5% a year, this works out to £5 annually, or £2.50 every six months.

While the Treasury issues gilts at a certain price, once purchased their value fluctuates due to multiple factors like interest rates, supply and demand, inflation, credit ratings and how close to maturity the bond is. The inverse relationship between interest rates and bond values arguably has the greatest effect on gilt prices. When newer gilts are issued with a higher interest rate, existing gilts become less valuable because they pay out less than the newer bonds. Conversely, if interest rates go down, the value of existing bonds goes up as the coupon rate becomes more attractive to investors.

This dynamic has been particularly significant in 2025 and 2026. As the Bank of England cut its base rate from its 5.25% peak to the current 3.75%, gilt prices have risen — benefiting existing holders who bought at higher yield levels.

Why do people invest in UK gilts?

Portfolio diversification — for most investors, gilts and other government bonds make up only a portion of their portfolio. Gilts offer another avenue for diversification, providing safer investments to balance out riskier ones such as equities.

Low risk — because the UK has never defaulted on repayments of its bonds, gilts are seen as a particularly safe investment. Unlike cash, they also offer returns that are largely protected from reinvestment risk when held to maturity.

Predictable income — gilts pay coupons twice a year, giving investors a predictable income stream. At current yield levels of approximately 4.5-4.8%, gilts are competitive with the best savings account rates while offering the additional benefit of capital gains tax exemption on disposal (for qualifying gilts held directly).

Capital gains tax exemption — qualifying corporate bonds and gilts held directly are exempt from CGT on disposal, making them a tax-efficient income vehicle — particularly for investors who have used their ISA allowance. For more on the tax treatment of fixed income investments, see our capital gains tax guide.

How to trade or invest in UK gilts

Investing in UK gilts directly

Typically, when HM Treasury issues new gilts, banks and other large investors tend to buy up the majority of them. This means most individual investors must buy gilts on the open market. Gilts are listed on the LSE, so investors purchase them in the same way they would stocks — through our share dealing account or stocks and shares ISA. Note that as confirmed by HMRC's June 2026 anti-circumvention factsheet, gilts held within a stocks and shares ISA are explicitly not classified as cash-like assets — they can be held freely within an ISA without restriction or the 22% cash interest charge that applies to money market funds above certain levels.

Investing in UK gilt ETFs

Bond exchange traded funds (ETFs) invest in multiple fixed-income government securities, allowing investors to spread their risk and minimise it. Gilt ETFs are a common way to invest in UK gilts — you don't need the larger capital required when investing directly, and bond ETFs are liquid and transparent, making them easy to buy and sell. They also pay regular dividends in the same way gilts pay coupons. Keep in mind that while most UK gilts have a maturity date, ETFs last indefinitely.

With us, you can invest in UK gilt ETFs including the Lyxor Core UK Government Inflation-Linked Bond ETF (GILI), the SPDR Barclays 15+ Year Gilt UCITS ETF (GLTL), and the iShares Core UK Gilts UCITS ETF (IGLT), which offers diversified exposure to UK gilts from ultra-short to those with a maturity date greater than 20 years. You can find these in our share dealing platform.

Trading UK gilt futures

Bond futures are financial derivatives. Unlike investing in gilts directly or through ETFs, trading on UK gilt futures involves speculating on what the price of gilts is going to be — done through a futures exchange via spread bets or CFDs based on the futures exchange's prices. These are complex, leveraged products, which means you can gain greater exposure to an underlying market while putting up a fraction of the full trade value — this can amplify profits but also magnify losses.

When bond trading, you would buy (go long) if you thought the price would rise, or sell (go short) if you thought it would fall. Common reasons to trade gilt futures include speculating on interest rate changes — gilts and interest rates have an inverse relationship — or hedging against existing positions to minimise portfolio risk.

For more on fixed income investing, see our guides on what are bonds and how do they work, how to trade or invest in bonds, and corporate bonds.

Why does the UK government sell gilts?

Governments issue gilts in order to raise funds where money might not otherwise be available — for various projects such as infrastructure upgrades, community schemes and debt management. The UK Debt Management Office (DMO) manages the issuance of gilts on behalf of HM Treasury, with issuance volumes set annually in the Budget. In 2025/26, the UK government issued approximately £297 billion in gilts, reflecting ongoing fiscal borrowing requirements.

What are the types of gilts issued by the Treasury?

Conventional gilts make up about 75% of the UK's gilt portfolio. They are standard government liabilities that pay a fixed coupon every six months until the bond matures, at which point the initial investment is repaid in full.

Index-linked gilts make up around a quarter of the British gilt portfolio. Unlike conventional gilts, coupon payments and principal repayments are not fixed — they are instead linked to the UK retail prices index (RPI), adjusted for accrued inflation, meaning they aren't eroded by inflation. In the current environment of elevated but declining inflation, index-linked gilts have attracted particular investor interest.

Gilt STRIPS (Separate Trading of Registered and Interest Principal Securities) occur when a gilt is broken down into separate coupons and the principal payment, sold in individual parts — essentially traded as zero-coupon gilts.

UK gilts summed up

UK gilts are debt-based investments issued by HM Treasury that pay coupons twice a year and repay the initial capital on a set date in the future. As of July 2026, the 10-year gilt yield stands at approximately 4.79% — near historically attractive levels for income investors. Governments sell bonds to fund various projects or repay debt. People invest in UK gilts to diversify their portfolio, receive a steady income and benefit from capital gains tax exemption on disposal. You can invest in gilts directly, via gilt-based ETFs or trade them using financial derivatives.

You can invest in UK gilts and gilt ETFs through our share dealing account or stocks and shares ISA, or trade gilt futures via spread betting or CFDs. For more on building an income portfolio with fixed income assets, see our guides on alternative investments and ISA vs savings account.