Guide

Gilts vs a savings account: which keeps more after tax?

A savings account and a short-dated gilt can look similar on headline rate. After tax they often aren’t — especially if you pay 40% or 45% tax or have used your Personal Savings Allowance. Here’s how to compare them properly.

The savings rate a gilt is worth to you

Take TG29 (0 1/2% Treasury Gilt 2029), maturing 31 Jan 2029. At the 15 Oct 2026 close it cost £90.91 per £100 and yields 4.74% before tax. Its 0.5% coupon is small, so most of its return is the tax-free rise to £100. To keep the same after tax, a savings account would need to pay:

Your tax rate	TG29 keeps a year	Savings rate needed to match
Basic rate (20%)	4.62%	5.89%
Higher rate (40%)	4.51%	7.73%
Additional rate (45%)	4.49%	8.40%

Assumes no unused Personal Savings Allowance, the gilt held to maturity, and the same tax rates on savings interest (rising 2 points from 6 April 2027). Indicative closing prices; figures move with the market.

The higher your tax rate, the higher the savings rate you’d need to match a low-coupon gilt — because savings interest is taxed in full, while most of that gilt’s return is a tax-free gain. Compare any gilt with your own savings rate on Compare.

Side by side

	Gilt	Savings account
Who you’re lending to	The UK government — backed by HM Treasury	A bank or building society
Protection	A direct obligation of HM Treasury; no compensation-scheme limit applies	FSCS protects up to £120,000 per person, per banking licence
Tax on income	Coupons taxed as savings income	All interest taxed as savings income
Tax on gains	Gains free of capital gains tax — at maturity or if you sell	Not applicable
Rate	Fixed to maturity when you buy	Easy-access rates can change at any time
Getting your money	£100 back per £100 face value at maturity; sell any day at the market price	Instant access, or locked for a fixed term
Price risk	Yes, if you sell before maturity	None
In an ISA	Yes — a stocks & shares ISA	Yes — a cash ISA

When a savings account makes more sense

You need instant access and can’t risk selling a gilt for less than you paid.
Your interest stays within your Personal Savings Allowance (£1,000 basic rate, £500 higher rate) — then the tax advantage of a gilt largely disappears.
You’re saving inside a cash ISA, where interest is tax-free anyway. From 6 April 2027 the cash ISA limit falls to £12,000 a year for under-65s (the overall ISA allowance stays £20,000).

When a gilt usually wins

You pay 40% or 45% tax and have used your Personal Savings Allowance.
You know when you’ll need the money, so you can hold to maturity and ignore price moves.
You want to lock in a rate rather than see an easy-access rate cut.
You hold more than the FSCS limit with one bank.

Coming in April 2027: tax on savings income — bank interest and gilt coupons alike — rises by 2 percentage points (to 22%, 42% and 47%). Because a low-coupon gilt’s gain stays tax-free, the rise widens its advantage. Every figure on YieldSmart already allows for it.

Information only — not financial advice. Gilt prices are indicative from last available close and may be delayed. Verify before transacting. UK tax treatment depends on your circumstances and may change.