# Gilts

UK government bonds

_**This information is for general guidance only and isn’t financial advice. Make sure you understand the risks and whether gilts are right for you before investing.**_

Lightyear offers direct access to a selection of [Gilts](https://lightyear.com/bonds/explore?ISSUER=EQUALS%3A1f191ae7-b23a-6fd9-86f7-e9520e05a21c) issued by HM Treasury. 

## What are gilts?
Gilts are bonds issued by the UK government. When you buy a gilt, you're lending money to the UK government. The government pays you a fixed amount of interest twice a year (the coupon), and on a set future date (the maturity date) it repays the full £100 face value (the principal) per unit, no matter what you originally paid for it. 

To learn more about gilts, you can check out the UK government’s [Simple Guide](https://commonslibrary.parliament.uk/research-briefings/cbp-11198/). 

## What type of gilts are available on Lightyear 
Lightyear only offers conventional gilts. Conventional gilts are the most common type of UK government bond. They have a fixed interest rate (the coupon) and length (the maturity date). This means your interest payments and final return are fixed on a predictable schedule but will not adjust upward if inflation rises.

## How gilt pricing works

The price of a conventional gilt is usually quoted in terms of price per £100 face value, although they can be traded in units as small as a penny. **On Lightyear, we display the price per £1 face value.** The face value, also called the nominal amount, is the amount of money (or principal repayment) the gilt holder will receive at the maturity date. 
An investor who owns a gilt can sell it on the market. Gilts may be sold for a price that is more or less than their face value, as the price will depend on market conditions.

Like any bond, a gilt's market price moves mainly with prevailing interest rates:
- The price tends to trade above £1 (a premium) when the gilt's coupon is higher than current rates on newer gilts.
- The price trades below £1 (a discount) when the gilt's coupon is lower than current rates on newer gilts.

This happens because the market prices each gilt so its overall return, the coupon income plus the gain or loss from its price converging to its face value at maturity, stays competitive with what's currently on offer. That combined return is known as the **yield-to-maturity**.

## Yield and maturity
When you look at a gilt in the Lightyear app, at the top of the page, you’ll see a few key figures: **Yield-to-Maturity %, Running Yield %, Clean (£ Price), Dirty (£ Price), Maturity (Date), Coupon %**.

Here’s what they all mean:

- **Yield-to-Maturity (YTM):** The return you can expect from the gilt if you buy it at the current price, hold it until maturity and reinvest the received coupon payment into the same gilt.
- **Running Yield:** The yearly interest rate based on the coupon divided by the gilt’s current Clean Price.
- **Clean Price:** The price of the gilt itself, excluding any interest that has built up since the last coupon payment.
- **Dirty Price:** This is the actual transactional price you pay when investing in a gilt. It includes the accrued interest that has built up since the last coupon payment. 
- **Maturity:** The date when the gilt ends. At maturity, the government repays the gilt's principal (£1 nominal value per gilt unit on Lightyear).
- **Coupon:** This is the annual interest rate paid on the gilt’s face value, set when the gilt is originally issued. This rate remains fixed throughout the gilt’s life. 

Keep in mind that yield figures will change constantly as the price of the gilt moves and as the maturity date gets closer.

**How to read them together:**
The Clean Price tells you the quoted market price of the gilt, and the Dirty Price is the amount you’ll actually pay. The coupon tells you the fixed interest payments, while the yield-to-maturity (YTM) takes the price, coupon payments and time to maturity together to estimate the return if you hold the gilt to maturity. 

### Gross equivalent yield
If you’re looking at gilts in a personal basic account, when scrolling down the individual gilt instrument page, you’ll see a “How tax impacts the yield of this Gilt” section that includes a Gross Equivalent Yield (GEY) calculator. 

The Gross Equivalent Yield (GEY) gives an estimated indication of what return an investor would need to earn on a fully taxable investment (like a savings account or corporate bond) to match the after-tax return of the gilt when held outside of a tax wrapper (such as an ISA). This is an interactive tool and how it is calculated depends on the income tax band selected.
**How is GEY calculated?**
GEY is used to give an approximate indication of what return you would need to earn on a fully taxable investment (like a savings account or corporate bond) to match the after-tax annualised return of the gilt when held to maturity. It is calculated by subtracting the gilt yield-to-maturity from the tax band (40% in the example we’ve used) multiplied by the gilt’s coupon and then dividing this result by the net retention factor after tax (e.g. 0.60 for 40% tax band).

Tax treatment depends on individual circumstances and may change in the future. It’s always best to get professional advice if you’re unsure about whether gilts are right for you or how the tax rules may apply to you.

## Coupon payments
Coupon payments are the periodic interest paid to gilt holders, usually twice a year, until the gilt matures.

**Coupon rate:** the fixed annual interest rate paid on the gilt's £1 face value. For example, a gilt with a 4% coupon will pay £0.04 a year per unit, split into two payments of £0.02 six months apart.
**Payment frequency:** almost all conventional gilts pay twice a year.
**Maturity:** coupon payments continue until the gilt's maturity date, at which point the government also repays the face value to the gilt holder.

## Tax treatment
For UK individual investors, the capital gain on an individual gilt is exempt from UK Capital Gains Tax, under section 115 of the Taxation of Chargeable Gains Act 1992. On the flip side, any capital loss cannot be used to offset gains elsewhere. Coupon payments are taxed as income at your normal rate.

Holding gilts in a Stocks and Shares ISA also shelters the coupon income from tax, not just the (already exempt) capital gain.

Whether you get a gain or a loss when investing in an individual gilt depends on a few things that are important to understand:
- If you hold the gilt to maturity, and you purchased the gilt at a price discounted to its face value, then the gain is knowable at the point of purchase, but you will only receive this gain at the gilt’s maturity date.
- If you sell before maturity, you'll only make a gain if the price has risen above what you paid for the gilt. If the price has dropped, you will sell at a capital loss. The price will depend on market conditions and the interest rate environment at the time of sale, so it's not knowable in advance.

For companies, although gilts are technically exempt under the same rule, "loan relationship" rules under the Corporation Tax Act 2009 bring both the coupon and any gain or loss into the company's corporation tax calculation instead.

Lightyear doesn't provide tax advice. Tax treatment depends on your individual circumstances and may change in future. Please speak to a professional advisor if you're unsure how this applies to you personally or to your business.

## If I sell my gilt before the coupon payment date, do I lose my accrued interest?
No. Interest accrues daily between coupon dates, and the gilt's price on the Lightyear platform (the dirty price) automatically includes interest accrued since the last coupon. If you sell before the next coupon date, the buyer compensates you for that accrued interest as part of the trade price.

It’s important to note that if you sell before maturity and your total nominal holdings of all gilts and similar fixed-income securities exceed £5,000 in a tax year, [HMRC's Accrued Income Scheme](https://www.gov.uk/government/publications/accrued-income-scheme-hs343-self-assessment-helpsheet/hs343-accrued-income-scheme-2024) may treat some of this accrued amount as taxable income rather than part of a tax-free gain. If you are unsure if or how this applies to you, consult with a tax adviser...

## How much does it cost to buy or sell gilts on Lightyear?
Gilts are priced the same way as regular shares on Lightyear. Trades are free in your personal account and cost £1 in your business account. On Lightyear, there is a minimum order when buying a gilt – £10.00.

Note that gilts are denominated in GBP, so if you buy a gilt with USD or EUR, then our FX fee will apply. 

You can find our full pricing [here](https://lightyear.com/en-gb/pricing).

## What order types are available?
For both buying and selling orders in Gilts, we offer only [market orders](/help/trading-and-investments/market-vs-limit-orders-what-are-they).

## Where to find the gilts?
On mobile, you can find a Gilts Collection in the Explore tab.  Alternatively, all available Gilts are visible in the [Gilts screener](https://lightyear.com/bonds/explore?ISSUER=EQUALS%3A1f191ae7-b23a-6fd9-86f7-e9520e05a21c)

---

Canonical: https://lightyear.com/en-gb/help/trading-and-investments/gilts