Investing in Gilts UK: Is It Time to Buy?

Investing in gilts has gone from a niche pursuit for pension funds to something ordinary UK investors ask about at dinner, and the reason is simple: the numbers finally look interesting. The 30-year gilt yields 5.65%, a level last seen in 1998. Every broker in the country is running a "bonds are back" campaign off the back of it.

They are right that the yields are real. They are wrong about why it matters. The pitch you keep hearing frames 4.90% on a 10-year gilt against the near-zero yields of the 2010s, which makes it look like a once-in-a-generation window. Set against the previous forty years, it looks like Tuesday. And for most people reading this, the number a gilt has to beat is not zero. It is the 3.9% sitting in an easy-access savings account with no lock-up and no price risk.

That gap, roughly one percentage point, is what you are actually being paid for taking a decade of interest-rate risk. Whether that is a good trade depends entirely on a question nobody in the marketing material asks: what job is this money doing?

This article is about the timing question. If you want the mechanics first, our guide to UK bonds, gilts and Premium Bonds covers what a gilt is, the types available and how the tax works.

Contents

• Where gilt yields actually are right now
• Why gilt yields have been rising
• Thirty years of gilt yields in one chart
• What a 4.90% yield is worth after tax and inflation
• Individual gilts and gilt funds are not the same product
• So is it time to start investing in gilts?
• Frequently Asked Questions

Where gilt yields actually are right now

Here is the gilt curve as of 6 August 2026, with the Bank of England's Bank Rate for reference. Bank Rate has sat at 3.75% since the Monetary Policy Committee held it on 30 July, on a 6-3 vote.

Three things stand out.

The whole curve sits above Bank Rate. Even the 2-year gilt pays 4.25% while the Bank pays 3.75%, which tells you the market is not expecting rate cuts to arrive quickly or deeply.

The curve slopes steeply upward. The 30-year pays 1.40 percentage points more than the 2-year. In a textbook that is compensation for tying money up longer. In practice, a gap that wide is the bond market pricing uncertainty about the next thirty years of UK borrowing.

And the long end is doing the heavy lifting. The 30-year touched 5.747% in September 2025, its highest since 1998, and has stayed close to that ever since. If you only read the 10-year headline, you miss where the real move has happened.

Why gilt yields have been rising

A gilt yield is the price the government pays to borrow. It moves on three things, and right now all three point the same way.

Start with the Bank of England, which is in no hurry. The Bank Rate is 3.75% with CPI inflation at 2.6% in June 2026, down from 2.8% in May. Inflation is close enough to the 2% target that the pressure to cut hard has eased, but not so far below it that the MPC is rushing. A 6-3 hold is a committee that disagrees with itself, and markets price that hesitancy into short-dated gilts.

Supply is heavy. The government is issuing a lot of debt, and gilts follow the same rule as everything else: more sellers than buyers means a lower price, and a lower gilt price means a higher yield. The Bank of England also stopped being a buyer when quantitative easing went into reverse, which removed the largest and least price-sensitive customer the gilt market had.

Then there is fiscal credibility, which is what shows up at the 30-year end. Long gilts are a bet on UK public finances decades out, and the market charges extra when it is unsure. The political churn of July 2026, with Andy Burnham replacing Keir Starmer as Prime Minister and John Healey replacing Rachel Reeves at the Treasury, added to that uncertainty rather than settling it. Bond markets do not much mind who is in charge. They mind whether the borrowing plan is legible.

Put those together and you get the shape above: short rates anchored by the Bank, long rates lifted by supply and doubt.

Thirty years of gilt yields in one chart

This is the context the "bonds are back" pitch leaves out.

In 1996 the 10-year gilt paid 7.81%. Through the whole of the early 2000s it sat between 4.4% and 5.3%. Then the financial crisis arrived, quantitative easing started, and the yield fell off a cliff. Between 2009 and 2021 it averaged 1.95%. In July 2020 the monthly average bottomed out at 0.21%.

Today's 4.69% average for 2026 does not look like a spike on that chart. It looks like a return to the pre-crisis normal. The reframe worth holding onto is this: gilt yields are not unusually high, the 2010s were unusually low. A generation of investors learned that bonds pay nothing, because for thirteen years that was true. It was the exception, not the rule.

Which cuts both ways. If you have been waiting for gilts to become worth owning again, they are. If you are expecting yields to fall back so you bank a big capital gain, you are betting on a return to conditions that were themselves historically strange.

For the broader UK picture these yields sit inside, our UK macro dashboard tracks Bank Rate, CPI, wage growth and unemployment refreshed daily from the ONS and the Bank of England. It does not carry gilt yields, deliberately, because the free real-time feeds are either licensed or hostile to scraping. But Bank Rate and inflation are the two inputs that move gilts most, and both are there.

What a 4.90% yield is worth after tax and inflation

The headline yield is a gross, nominal number, and if the difference between a coupon and a yield to maturity is still fuzzy, our guide to how bond yields work is the place to start. Two things happen to that number before it reaches you.

Inflation. CPI ran at 2.6% in June 2026. A 10-year gilt at 4.90% therefore offers roughly 2.3% above inflation, and the 30-year at 5.65% offers about 3.0%. That is a genuine real return. Through most of the 2010s the real yield on gilts was negative, meaning you were paying the government for the privilege of lending to it. This is the strongest single argument for gilts today, and it is a better argument than the one the adverts make.

Tax, which is where UK specifics matter. Gilt coupons are taxed as savings income. The Personal Savings Allowance covers £1,000 of interest for a basic-rate taxpayer, £500 for a higher-rate taxpayer, and nothing at all for an additional-rate taxpayer. Above that, the coupon is taxed at your marginal rate.

But capital gains on gilts are completely exempt from Capital Gains Tax, and have been since 2 July 1986 under section 115 of the Taxation of Chargeable Gains Act 1992. HMRC publishes the full list of exempt securities.

That combination creates the quiet trade higher earners use. A gilt with a low coupon trading below its £100 redemption value delivers most of its return as a capital gain rather than as income. The gain is tax-free, and only the small coupon is taxable. For an additional-rate taxpayer with no PSA at all and a taxable account already full, a low-coupon gilt can beat a savings account paying a higher headline rate, because the savings interest is taxed at 45% and most of the gilt return is not taxed at all.

Inside an ISA or SIPP this advantage disappears, because nothing in those wrappers is taxed anyway. If you have allowance left, use the wrapper first. The gilt tax trick is for money that has nowhere else to go.

Individual gilts and gilt funds are not the same product

This is the thing most articles get wrong, and it matters more than the yield.

Buy an individual gilt and hold it to maturity, and you know your outcome on day one. You get the coupons, and you get £100 per unit back on the redemption date. The price can swing violently in between and it does not change what you receive at the end. Short of cash in the bank, that is about as predictable as a nominal return gets for a UK retail investor, and it is backed by HM Treasury. Predictable in pounds, though, not in purchasing power: inflation can still erode what those pounds buy.

Buy a gilt fund and you have bought something else entirely. A fund holds a rolling basket and sells gilts before they mature to maintain a target duration. There is no maturity date, so there is no guaranteed return. If yields rise, the fund's price falls and there is no redemption date that rescues you. Anyone who held a gilt fund through 2022 learned this the hard way: the average UK index-linked gilt fund fell 30.9% that year and the average conventional UK gilt fund fell 20.2%, according to sector figures compiled by interactive investor. Past performance is not a guide to future returns, but it does show what duration risk looks like when it arrives.

Neither is wrong. They do different jobs. If you have a known liability on a known date, a school fee in 2031, a planned retirement in 2034, an individual gilt maturing near that date is close to a perfect instrument. If you want a diversifying asset that tends to hold up when equities fall, a fund is the sensible way to hold it, which is the case our piece on bonds for de-risking a portfolio sets out in more depth. You just have to accept the price risk that comes with it.

Worth saying: buying individual gilts is more faff. You are picking a specific security by name and maturity date rather than clicking one button, and most platforms bury the gilt search somewhere unhelpful. What you get in return is certainty about the amount you get back and the date you get it.

Picking the fund because it is easier to buy, while thinking you have locked in 4.90%, is the actual mistake.

So is it time to start investing in gilts?

"Is it time" is the wrong question, because it treats gilts as a market call. Try these instead.

Do you have a date? If you need a specific sum on a specific date within the next ten years, an individual gilt maturing just before it is one of the better-matched tools available in the UK market. This is where the current yields matter most, because the rate you fix today is the highest in over fifteen years.

Are you comparing against the right number? As of early August 2026, easy-access savings rates are around 3.9% and some three-year fixes reach 4.6%, so it is worth shopping around the best savings accounts before committing to a decade. A 10-year gilt at 4.90% pays roughly one percentage point more than instant-access cash for ten years of duration risk. For an emergency fund, that is a bad trade. For long-term money you were never going to touch, it may well be a good one. Run it through our compound interest calculator and the maths on that one percentage point is usually less dramatic than people expect.

If you still have ISA or SIPP allowance left, most readers are better served filling that first. Nearly always.

Additional-rate taxpayers with a taxable account are, in our view, the clearest case of the lot, because the CGT exemption on low-coupon gilts does real work that a savings account cannot match.

And if you are buying because equities feel expensive, be careful. That is a market-timing decision wearing a safety costume. Gilts carry their own risk rather than sheltering you from it, and 2022 proved that bonds and equities can fall together.

The case for gilts today rests on a positive real return, backed by the UK government, available for the first time in about fifteen years. It does not rest on yields falling and handing you a capital gain. Genuinely useful, then, and a lot less exciting than the marketing suggests.

Further reading: Gilts earn their keep mostly as retirement and de-risking money, and Pete Matthew's The Meaningful Money Retirement Guide is the clearest UK-specific treatment of how much of your pot should sit in what, and when to start shifting it. Disclosure: affiliate link - we may earn a small commission if you buy through it, at no cost to you.

Frequently Asked Questions

Are UK gilts a good investment?

For the first time in about fifteen years, gilts offer a positive real return: the 10-year yields 4.90% against CPI inflation of 2.6%, so roughly 2.3% above inflation. That makes them a reasonable investment for money with a known end date, and a poor one for an emergency fund you might need next month. The average return over the long run has tracked the yield you buy at, which is why the entry yield matters more than any forecast.

What are the disadvantages of gilts?

Three main ones. Interest-rate risk: if yields rise after you buy, the price of your gilt falls, and you only avoid that loss by holding to maturity. Inflation risk: a conventional gilt pays a fixed coupon, so an inflation spike erodes what those pounds buy, which is what index-linked gilts exist to address. And opportunity cost: over long periods, global equities have returned more than gilts, so heavy gilt weightings in a young portfolio trade growth for stability you may not need yet.

Are gilts a safe investment?

Gilts carry effectively no credit risk. The UK has an exceptionally long record of paying gilt holders, and because gilts are issued in the government's own currency it can raise taxes or create money to meet them. But safe from default is not the same as safe from loss. If you sell before maturity, you get the market price, and that price falls when yields rise. Long-dated gilt funds fell more than 30% in 2022. Hold an individual gilt to maturity and you get £100 per unit regardless.

How do I buy UK government bonds?

Through any major UK investment platform. Interactive Investor, Hargreaves Lansdown and AJ Bell all let you buy individual gilts, usually for a standard share dealing fee. You search for the gilt by name, such as "Treasury 4.25% 2032", and buy it like a share. You can also buy gilt funds and ETFs, which is simpler but a different product. Buying directly from the Debt Management Office is possible but the platform route is easier for most people.

What is the difference between a gilt coupon and a gilt yield?

The coupon is the fixed annual interest printed on the gilt, paid on the £100 face value. The yield is what you actually earn given the price you paid. Buy a 2% coupon gilt for £80 and your yield is far above 2%, because you collect the coupon and also gain £20 when it redeems at £100. Coupon is fixed forever. Yield moves with price.

Do I pay tax on gilts?

The coupon is taxed as savings income at your marginal rate, after the Personal Savings Allowance of £1,000 for basic-rate and £500 for higher-rate taxpayers. Additional-rate taxpayers get no allowance. Capital gains on gilts are exempt from CGT entirely. Held inside an ISA or SIPP, gilts are free of both.

Will gilt yields go higher from here?

Nobody knows, and anyone who tells you otherwise is guessing. Yields depend on inflation, Bank Rate, government borrowing and market confidence in UK public finances, none of which are predictable over a decade. This is why matching a gilt's maturity to a date you actually care about beats trying to time the top.

This article is information, not financial advice. The value of investments can fall as well as rise and you may get back less than you put in. Gilt prices move with interest rates and selling before maturity can produce a loss. Past performance is not a guide to future returns. All yields quoted are as at 6 August 2026 and change daily. Tax treatment depends on your individual circumstances and tax rules can change. Consider speaking to a regulated financial adviser about your own situation.