Gilt accrued interest and the dirty price, explained.

Facts checked 15 October 2026

You buy a gilt quoted at 98.50 and the contract note charges you more than 98.50 per £100. The difference is accrued interest: your share of the next coupon that the seller has already earned. This page covers conventional gilts; index-linked gilts work on the same principle with an inflation uplift on top.

Clean price and dirty price

A gilt pays its coupon in two halves, six months apart. Between those dates interest builds up day by day, but it is all paid to whoever holds the gilt on the record date. So when a gilt changes hands, the buyer pays the seller for the interest earned so far.

Clean price is the quoted price per £100 nominal, without that interest. It is the figure on a platform's dealing screen and in the DMO's prices.
Accrued interest is half the annual coupon, times the days since the last coupon date, divided by the days in the current six-month period, counted to the settlement date (usually the next business day).
Dirty price is clean price plus accrued interest. It is what you actually pay.

An example

You buy £10,000 nominal of a 4% gilt at a clean price of 98.50. The trade settles 61 days into a 182-day coupon period.

Clean consideration: £10,000 × 98.50% = £9,850.00.

Accrued interest: 4% ÷ 2 × 61 ÷ 182 = 0.6703 per £100, so £67.03.

Total paid, before any dealing charge: £9,917.03.

At the next coupon date you receive the full half-year's interest, £200. £67.03 of it simply returns what you paid the seller; the other £132.97 is what you earned while you held it.

So the dirty value of a gilt you hold creeps up a little every day and falls back by about half a year's coupon around each payment date. The coupon itself makes up the difference. A record that counts the dirty amount as the cost but values the holding at the clean price starts every purchase with a small loss that is not real.

Why accrued interest is sometimes negative

A gilt goes ex-dividend seven business days before each coupon date. Whoever holds it at that point receives the whole coupon, even if they sell during those seven days. So a buyer whose trade settles in the ex-dividend period does not get the coming coupon, and the seller refunds the interest for the days between settlement and the coupon date.

On the contract note that refund appears as negative accrued interest. In the example above, a trade settling three days before the coupon date would show accrued interest of about −£3.30, and the dirty price would be below the clean price.

How accrued interest is taxed

Gilts are exempt from capital gains tax: a gain on the price is not taxed, and a loss cannot be used against other gains. The coupons are taxable income outside an ISA or a pension.

Accrued interest is caught by the Accrued Income Scheme, unless the total nominal value of all the securities you hold is £5,000 or less at every point in the tax year of the trade and the previous one. Under the scheme:

When you sell, the accrued interest the buyer pays you is taxed as income, as if it were interest.
When you buy, the accrued interest you paid is relief: it is deducted from the taxable interest of the next coupon, so you are taxed only on the part you earned.

Inside an ISA or a pension none of this applies, because the interest is not taxed in the first place.

This is also why low-coupon gilts are popular in general accounts. A gilt with a small coupon bought below 100 returns most of its yield as the rise to 100 at redemption, which is free of capital gains tax, and only a little as taxable interest. What that is worth to you depends on your tax band, which is why the value after tax of the same gilt differs from one holder to the next.

How Fairworth records a gilt

A gilt purchase in Fairworth is recorded at the dirty consideration you actually paid, with the clean price and the accrued interest shown separately, so the holding does not start life mis-stated. The document reader reads a gilt contract note with the clean price, dirty price and accrued interest broken out. Each gilt's coupon, coupon dates and redemption date come from the DMO's list of gilts, refreshed daily.

A gilt you hold has a page of its own: its yield to maturity before and after tax at your band's rate, running yield, duration, the interest accrued today, the next coupon and ex-dividend date, and a chart of the remaining cash flows and the price's pull to par. In the after-tax view, a gilt's capital value is counted as free of capital gains tax. Yields, duration and accrued interest are calculated for conventional gilts; index-linked gilts are not modelled for these yet.

The example uses round, invented figures and is not a quote for any real gilt. Tax treatment depends on individual circumstances; the rules described were checked against HMRC's guidance (HS343, and the Capital Gains Manual at CG54900) in October 2026. This page is information, not tax or investment advice.