Gilt

What is a gilt?

A gilt is a type of bond issued by the government of the United Kingdom with a maturity of one year or more. The term "gilt" is short for "gilt-edged security," which originally referred to the gold-leaf edging on paper certificates. 

Gilts are also debt instruments issued by the UK Government, but they have some differences to UK Treasury bills. 

Gilts are essentially loan agreements where investors lend money to the British government in exchange for regular interest payments, known as coupon payments, and the promise of repayment of the principal amount at a specific date in the future.

There are two main types of gilts:

  1. Conventional Gilts: These have a fixed coupon rate, meaning the interest payments remain constant throughout the life of the gilt. The government repays the face value of the gilt at maturity.

  1. Index-linked Gilts: These are linked to the UK Retail Price Index (RPI), a measure of inflation. The principal and the interest payments are adjusted in line with inflation, protecting investors from the eroding effects of inflation on their investment.

Gilts are considered to be low-risk investments since they are backed by the UK government. 

While the UK enjoys some of the highest credit ratings from major agencies, it is not unprecedented for the government to default on these types of bonds. 

Following the First World War, the UK government restructured its debt and altered the original terms of bonds on issue. In 1932, the Government also requested that investors in the War Loans scheme accept a lower interest payment to help avoid a more dire financial situation.

Nevertheless, in the modern financial system, gilts play a crucial role. They are deemed as reflective of the “risk-free” rate of return that investors can expect in markets since it is all but guaranteed that the UK government will repay their debts. 

More terms

Margin call

Learn what a margin call stands for in financial terms.
Read more

Accounting standards

The rules a company follows when preparing financial statements.
Read more

OEIC

Unique to the UK, these funds pool together money to invest from multiple investors.
Read more

Annualised Rate of Return

The average annual return an investor sees over a set period of time.
Read more

Income statement

A summary of a company's income and expenses over a set period of time.
Read more

Capital

Learn what financial capital means
Read more

Coupon

Also called a dividend, this is the fixed annual interest paid to gilt holders. It’s usually paid in two equal, semi-annual instalments and expressed as a percentage of the nominal value of the gilt.
Read more

Bed & ISA

Understand what Bed and ISA is and how it works
Read more

Account balance

The amount of money a user has stored in a financial repository.
Read more
Compare plans

Pick the plan that suits you best

Save 17% when you choose an annual subscription.
Freetrade basic plan icon with one star on a black circle
Basic
£0.00
/Mo.
 
Get basic
Accounts include
  • Outline icon of a bank

    General investment account

  • icon of a banknote

    Stocks and shares ISA

    New
Benefits include
  • Freetrade logo icon

    Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more

  • icon of a coin that has a dollar symbol inside a circle

    FX fee of 0.99% on non-GBP trades

  • icon of a stack of coins

    1% AER on up to £1k uninvested cash

Standard
£4.99
/Mo.
£59.88 billed annually
Accounts include
  • Outline icon of a bank

    General investment account

  • icon of a banknote

    Stocks and shares ISA

Benefits include
  • Freetrade logo icon

    Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more

  • icon of a coin that has a dollar symbol inside a circle

    FX fee of 0.59% on non-GBP trades

  • icon of a stack of coins

    3% AER on up to £2k uninvested cash

  • Icon of a pie-chart
Plus
£9.99
/Mo.
£119.88 billed annually
Accounts include
  • Outline icon of a bank

    General investment account

  • icon of a banknote

    Stocks and shares ISA

  • Outline of a piggybank

    Personal pension (SIPP)

Benefits include
  • Freetrade logo icon

    Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more

  • icon of a coin that has a dollar symbol inside a circle

    FX fee of 0.39% on non-GBP trades

  • icon of a stack of coins

    5% AER on up to £3k uninvested cash

  • Icon of a pie-chart
Freetrade basic plan icon with one star on a black circle
Basic
£0.00
/Mo.
 
Get basic
Accounts include
  • Outline icon of a bank

    General investment account

  • icon of a banknote

    Stocks and shares ISA

    New
Benefits include
  • Freetrade logo icon

    Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more

  • icon of a coin that has a dollar symbol inside a circle

    FX fee of 0.99% on non-GBP trades

  • icon of a stack of coins

    1% AER on up to £1k uninvested cash

Standard
£5.99
/Mo.
billed monthly
Accounts include
  • Outline icon of a bank

    General investment account

  • icon of a banknote

    Stocks and shares ISA

Benefits include
  • Freetrade logo icon

    Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more

  • icon of a coin that has a dollar symbol inside a circle

    FX fee of 0.59% on non-GBP trades

  • icon of a stack of coins

    3% AER on up to £2k uninvested cash

  • Icon of a pie-chart
Plus
£11.99
/Mo.
billed monthly
Accounts include
  • Outline icon of a bank

    General investment account

  • icon of a banknote

    Stocks and shares ISA

  • Outline of a piggybank

    Personal pension (SIPP)

Benefits include
  • Freetrade logo icon

    Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more

  • icon of a coin that has a dollar symbol inside a circle

    FX fee of 0.39% on non-GBP trades

  • icon of a stack of coins

    5% AER on up to £3k uninvested cash

  • Icon of a pie-chart

You’re just minutes away from commission-free investing

When you invest, your capital is at risk