Paying you a regular income
Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested.
All investments carry an element of risk which may differ significantly. If you are unsure as to the suitability of any particular investment or product, you should seek professional financial advice
Gilts and bonds are a kind of loan from investors to either the UK government (in the case of gilts) or a company (in the case of a bond).
They usually have a set life. And at the end of that life the original amount of the loan – the 'nominal value' – is usually paid back to whoever holds the gilt or bond at the time. This isn’t always guaranteed though.
The return is a combination of interest received and any change in the bond’s value. For overseas bonds, changes in the foreign currency exchange rates may also affect returns.
If you are looking for a steady income, gilts and bonds pay income regularly and at a set rate (which is often fixed but can be variable).
You don’t pay tax on income from gilts and bonds if you hold them in an ISA or SIPP Account. For IDA you may have to pay income tax. How much depends on your personal circumstances.
One advantage of gilts or UK bonds is that if you sell them at a higher price than you bought them for this doesn’t usually count as a capital gain for Capital Gains Tax. But there are some circumstances when you might have to pay Income Tax on a gain.
Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.