What to do when your gilt matures
There’s been a surge in gilt purchases since interest rates began to rise in late 2021. Sam Benstead, fixed income lead at interactive investor, explains why, and runs through tax breaks on gilts and potential next steps once your gilt matures.
23rd May 2025 09:32
by Sam Benstead from interactive investor
Sam Benstead, fixed income lead, interactive investor: We’ve seen a surge in gilt purchases since interest rates began to rise in late 2021, with investors drawn to higher yields as well as a special tax break on gilts – there is no capital gains tax due when selling a gilt or collecting its par value on redemption.
When a gilt matures, investor receive their final semi-annual coupon payment and the £100 redemption value of the gilt – this is the amount that the government borrowed per gilt issued.
- Invest with ii: Invest in Bonds | Share Dealing with ii | Open a Low Cost SIPP
With a cash sum deposited in accounts, you may be wondering what to do next.
If you’re after more gilts, you can find the gilts we offer on the platform by looking at ii.co.uk/bonds.
For short-term savings, look for gilts maturing when you want your money back, like in two or three years’ time. Holding a gilt to maturity means you don’t have to worry about price swings, as you know that the gilt will return to its par value when it matures. The UK government has never defaulted on its debt.
If you want gains to come from capital, not income, then buying gilts that trade below their par value due to lower than market rate coupons is key. The difference between the gilt purchase price and the £100 redemption value is tax free, even if held outside an ISA or a SIPP.
- Everything you need to know about investing in gilts
- Building a ‘gilt ladder’ – everything you need to know
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
For income, look for higher coupons. Remember though, coupons are taxed as income if held outside a tax wrapper.
Gilts can also be used in a portfolio to make a bet on the direction of interest rates.
If interest rates fall, then gilt prices are likely to rise, with longer-maturity gilts rising the most in value.
This can be useful when thinking about portfolio diversification, as falling interest rates may be the result of a weak economy as well as a falling stock market.
Be careful though, gilts with a high duration, or sensitivity to interest rates, can fall sharply in value in a rising interest rate environment, as we saw in 2022.
Outside of gilts, ii offers thousands of funds, shares, investment trusts and exchange-traded funds (ETFs) that may fit your investment needs. Our investment research and data tools can help you find what you’re looking for.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
Important information – SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial adviser before making any decisions. Pension and tax rules depend on your circumstances and may change in future.