What a gilt ladder is, and how it is taxed.

Facts checked 22 October 2026

A gilt ladder is a set of UK government bonds chosen to mature one after another, so that a known sum comes back on each date. People build them for cash they expect to need over the next few years. For some holders the tax treatment of gilts is a large part of the appeal; for others it makes no difference at all. This page explains which is which. It covers conventional gilts; index-linked gilts work differently and are not covered here.

How a ladder works

A conventional gilt pays a fixed coupon twice a year and repays £100 for every £100 nominal on its redemption date. If you hold it to that date, you know today exactly what it will pay and when, whatever happens to interest rates in between.

A ladder spreads money across several gilts with different redemption dates, each one a rung. A ladder with five rungs might hold gilts redeeming roughly a year apart. When the first rung redeems, the cash is either spent or used to buy a gilt beyond the last rung, and the ladder keeps its length. The dates are usually chosen around when the money is expected to be needed: a tax bill, school fees, a planned purchase, or income in the early years of retirement.

Why the tax is different from a savings account

A gilt can earn its return in two ways: the coupon, and the rise from the price you paid to the £100 it repays. The tax treatment of the two is different.

The coupon is interest. Outside an ISA or a pension it is taxable income, like interest from a bank, and it uses the same Personal Savings Allowance.
The rise to £100 is a capital gain, and gilts are exempt from capital gains tax. It is not taxed, and it does not use your annual exempt amount. (The other side of this: a loss on a gilt cannot be set against other gains.)

Gilts issued when interest rates were very low pay small coupons, and they now trade below £100. Most of what such a gilt returns to redemption is the rise to £100, which is untaxed. Only a little arrives as taxable interest. A savings account at the same rate pays it all as interest.

An example

A made-up gilt pays a 0.5% coupon and redeems in exactly one year. You buy £10,000 nominal at a clean price of 96.60 on a coupon date, so there is no accrued interest to pay. It costs £9,660.

Over the year it pays two coupons, £50 in total, then repays £10,000. The return before tax is £50 of interest plus a £340 gain: £390, or 4.04% on what you paid.

Compare £9,660 in a savings account paying 4.04%. Before tax it also earns £390, all of it interest. What each keeps after tax, assuming the Personal Savings Allowance is already used by other interest:

Basic rate (20%): gilt £380 (3.93%); savings £312 (3.23%).
Higher rate (40%): gilt £370 (3.83%); savings £234 (2.42%).
Additional rate (45%): gilt £367.50 (3.80%); savings £214.50 (2.22%).
In an ISA or a pension, or with interest inside your allowance: both keep £390 (4.04%).

For a higher-rate taxpayer, a savings account would need to pay about 6.4% before tax to keep as much as this gilt.

The example leaves out dealing charges and platform fees. Both reduce the gilt's return, and on a short holding they can take a noticeable share of it. A gilt with a high coupon bought above £100 behaves the other way: nearly all its return is taxable interest, and the fall to £100 is a loss that cannot be used. So the tax advantage belongs to low-coupon gilts held outside a wrapper, not to gilts in general.

Who the tax treatment makes little difference to

Gilts held in an ISA or a pension. Interest and gains are untaxed there anyway, so a low coupon brings no tax advantage over a high one or over cash in the same wrapper.
Interest within your allowances. The Personal Savings Allowance is £1,000 a year for a basic-rate taxpayer, £500 for a higher-rate taxpayer and nothing for an additional-rate taxpayer. If your other income is low, the starting rate for savings can make up to £5,000 more interest tax-free. While all your interest fits inside these, a bank account's interest is untaxed too.

From 6 April 2027 the tax rates on savings income rise by 2 points, to 22%, 42% and 47%. The allowances do not change. Gilt coupons are savings income, so they are taxed at the new rates too. In the example above, for a higher-rate taxpayer, the gilt would keep £1 less and the savings account about £8 less.

What a ladder does not do

It is only fixed if you hold to redemption. A gilt sold early fetches the market price on the day, which may be more or less than you paid. Rising interest rates push prices down.
It fixes the return in pounds, not in what they buy. A conventional gilt pays the same £100 whatever inflation has done in the meantime.
Each rung has to be reinvested at the rates of the day. When a rung redeems, the yield on a new gilt may be higher or lower than the old one.
It costs something to run. Dealing charges and any platform fee on the holding come off the return. They differ widely between platforms; the platform cost comparison shows what UK platforms charge.

Buying a gilt between coupon dates also means paying the seller for interest built up since the last coupon. How that is charged and taxed is in Gilt accrued interest and the dirty price.

How Fairworth shows it

Fairworth's Government bonds page lists the conventional gilts that redeem within a horizon you choose, from the DMO's list of gilts, refreshed daily. For each one it shows the ISIN, redemption date, coupon, clean price, the yield before tax and an after-tax yield at your own income tax rate. That after-tax yield taxes the coupons after your Personal Savings Allowance and treats the rise to £100 as free of capital gains tax. Opening a gilt shows its price, the London Stock Exchange bid and offer, and the gain to redemption after tax. The page also shows your cash and the gilts you already hold, with a blended yield. It does not buy anything: you deal through your own platform, using the ISIN.

Once you hold gilts, the Gilts page draws your ladder: the nominal redeeming in each year, stacked by gilt, across every account. Below it is a calendar of the coupons and redemptions due in the next 12 months, with a total. It also shows a blended yield to redemption before and after tax, and how sensitive the gilts' value is to a change in interest rates. In the after-tax view of your whole portfolio, a gilt's capital value is counted as free of capital gains tax.