Here’s why UK retail investors have flocked to gilts in 2025, making it a record year:

1. Yields at Multi-Year Highs

Sharp rise in gilt yields: Long-dated gilt yields, like the 30-year, have climbed toward their highest levels since 1998—hovering around 5.57%–5.72%

This surge is largely attributed to a global bond market sell-off and heightened concerns over the UK’s fiscal trajectory
Financial Times

Higher yields make gilts particularly compelling for investors seeking fixed-income returns.

2. Capital Gains Tax (CGT) Exemption

When investors buy gilts at a discounted price (below their £100 face value), they can realize tax-free capital gains by holding to maturity or selling at a higher price—Gilts directly held are exempt from CGT

This tax efficiency is especially attractive to higher earners who may have already exhausted ISA allowances

3. Record Retail Platform Inflows

Leading platforms like AJ Bell, and Interactive Investor have reported record-breaking gilt sales:

Interactive Investor noted that volumes had already exceeded last year’s record by about 9%

AJ Bell reported strong net flows into gilts since June, with 2025 already “well ahead” of 2024’s full year

4. Appeal of Low-Coupon Gilts

Low-coupon gilts, which offer most of their return in the form of capital gain rather than taxable interest, have seen increased demand—because capital gains are exempt from tax

For example, Hargreaves clients heavily traded short-dated gilts like the 0.375% 2026 and 0.125% 2028 issues, while the most popular in trade count was the 5.375% 2056 gilt

These instruments allow investors to maximize tax-efficient returns—especially outside of ISAs.

5. Predictability, Diversification & Income

With volatile equity markets, gilts offer stability, predictable income, and diversification benefits

Especially as yields surpass typical equity dividend yields, gilts have regained appeal as a dependable income source
BNY

Summary Table
Factor Why It Matters
Elevated gilt yields Higher returns attract yield-seeking investors
CGT exemption Tax-free capital gain increases net profitability
Platform sales record Testament to unusually high investor demand
Low-coupon gilts Maximize tax-efficient capital gain rather than taxable income
Stability and diversification Secure income and portfolio smoothing amid market uncertainty

In short: A confluence of high yields, tax advantages, behavioural momentum, and wider macroeconomic positioning has stoked a surge in retail interest, pushing 2025 toward an all-time high in direct gilt investment.